Cash discount decisions Prairie Manufacturing has four pessible suppliens, all o

Question

Cash discount decisions Prairie Manufacturing has four pessible suppliens, all of which offer dfferent credn tems Except for the fferences in oadt tema, heir preducts and services aevirtualy idenscal The credt berms offerad by theasuppliers are shown in the folowing table E (NoeAme a 35-day year) Calculane the pmare cost of griving up thne cean discont thom each supplier b. and reach ofthe suppliers iS Viewed sepwatety which, if any of the suppler cash dscounts should thtmpe up? rthetm needs shonsem und, which are oumenty avalable from its commercial bank at9% e. nyuounat Pave en your answer ? part b felabve to his $uppier Now am me than* fm could stretch by 30 days its accounts payable net penodotynom supplier M what mpaa . The appro mate cost of ging up the cash dscourthom supple Jis % Rund to two decrnal places The approomate cost ofgiving up the cash discont tom suppler Kis %. (Round to two deornal paces } The acero nat* cost ofghing orecash dsco re hem suo ier L ts?% ??0 die two decr a paces) Data Table too eathe dats abe te eno cack on the copy its contents into a spreadsheet con i cated on the ten na b. Praine should Praine should Praine should the cash discount from supplier (Seled om the drop down menu) the cashascountfrom supplier K °Select tomte dop down menu ) the cash dscount from supplier L (Selact from the drop down manu 30 net 100 EOM 1/10 net 7D EOM Print Done If the irm could stretch by 30 days its accounts payable (net period only) from suppler M.Praine shoud the cash dscount from supplier M because the cost of giving up the cash discount is than he 9% cost of borrowing (Select tom

Explanation / Answer

As per rules I will answer the first 4 subparts of the question

Cost of trade credit = [Discount %/ (1-Discount %)] x [360/(Allowed payment days - Discount days)]

Supplier J = (3%/(1-3%))*(365/(30-15)) = 75.26%

Supplier K= (2%/(1-2%))*(365/(100-30)) = 10.64%

Supplier L= (1%/(1-1%))*(365/(70-10))= 6.14%

Supplier M= (2%/(1-2%))*(365/(90-20)) = 10.64%

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