Home / Questions / The Masson Corporation needs to raise $500,000 for one year to supply working capital to a
The Masson Corporation needs to raise $500,000 for one year to supply working capital to a new store. Masson buys from its suppliers on terms of 3/10, net 90, and it currently pays on the 10^{th} day and takes discounts, but it could forgo discounts, pay on the 90^{th} day, and get the needed $500,000 in the form of costly trade credit. Alternative, Masson could borrow from its bank on a 12% discount interest rate basis.
a. What is the effective annual interest rate of forgoing discounts?
b. What is the effective annual interest of the bank loan?
- Please show your work and explain how you get the answers with cash flows method and how we do it using the financial calculator.
Nov 30 2019 View more View Less
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