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Langley Clinics, Inc. buys $400,000 in medical supplies a year (at gross prices) from its major supplier,Consolidated Services, which offers...

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Question

Langley Clinics, Inc. buys $400,000 in medical supplies a year (at gross prices) from its major supplier;Consolidated Services, which offers Langley terms of 2.5/10, net 45. Currently, Langley is paying the;supplier the full amount due on Day 45, but it is considering taking the discount, paying on Day 10, and;replacing the trade credit with a bank loan that has a 10 percent annual cost.;a. What is the amount of free trade credit that Langley obtains from Consolidated Services? (Assume;360 days per year throughout this problem.);b. What is the amount of costly trade credit?;c. What is the approximate annual percentage cost of the costly trade credit?;d. Should Langley replace its trade credit with the bank loan? Explain your answer.;e. If the bank loan is used, how much of the trade credit should be replaced?

 

Paper#81620 | Written in 18-Jul-2015

Price : $27
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