# Neveready Flashlights Inc Needs 317 000 To Take A Cash Discount Of 3 15 Net 70 A Ban 2457403

Neveready Flashlights Inc. needs $317,000 to take a cash discount of 3/15, net 70. A banker will loan the money for 55 days at an interest cost of $13,200.

**a.** What is the effective rate on the bank loan? **(Use a 360-day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)**

**b.** How much would it cost (in percentage terms) if the firm did not take the cash discount but paid the bill in 70 days instead of 15 days? **(Use a 360-day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) **

**c.** Should the firm borrow the money to take the discount?

No Yes

**d.** If the banker requires a 20 percent compensating balance, how much must the firm borrow to end up with the $317,000?

**e-1.** What would be the effective interest rate in part *d* if the interest charge for 55 days were $7,200? **(Use a 360-day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) **

**e-2.** Should the firm borrow with the 20 percent compensating balance requirement? (The firm has no funds to count against the compensating balance requirement.)

No Yes

Neveready Flashlights Inc. needs $317,000 to lake a cash discount of 315, nel 70. A bariker will loarn the money for 55 days at an interest cost of $13,200. a. Wat is the elfective rale on the brank loan? (Use a 360-day year, Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) Eecive rate of interes alculations b. How much would t cost (in percentage tems) ir the nrm did not taike the cash discount but paid the bill in 70 days instead ot 15 days? (Use a 380-day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places. Coct of nct takirg a cash dixceurt ? cash discount c. Should the fm bomow the money to take the discount? money to scount? O No Yes d. It the banker requires a 20 percent compansating balance, how much must the tim borrow to end up wth the 5317,000? orrow to to bc bomawcd e-1. What wouid be te effective interest rate in part d if the interest charge for 55 days were $7,200 (Use a 360-day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) 0-2. Should the firm . Should the firm borrow with the 20 percent compensating balance requrement?? he trm has no tunds to count against the compensating balance requireme unt against the No Yas