Posted by **Kimmie** on Saturday, October 15, 2011 at 7:53pm.

Can anyone explain to me how to use this formula?

Cost of failing to

take a cash discount

Disc

ount percent

100 percent Discount percent

3

60

Final due date Discount period

I am trying to calculate Assume the proceeds from the loan with the compensating balance requirement will be used to take cash discounts. Disregard part b about installment payments. and us the loan costs from part a. If the terms of the cash discount are 2/10, net 60, should the firm borrow the funds to take the discount? I cannot understand how I am supposed to do this. The figures I am using come from the following:

The Watson Corporation is negotiating a loan from PNC Bank. The company needs to borrow $300,000.

The bank offers a rate of 7% with a 30% compensating balance requirement, or as an alternative, 10% with additional fees of $4,700 to cover the services the bank is providing. In either case, the rate on the loan is floating (changes as the prime interest rate changes), and the loan would be for one year

## Answer this Question

## Related Questions

- finance - compute the present value of a $100 cash flow for the following ...
- Financial Analysis - Compute the present value of a $100 cash flow for the ...
- Math - With the stars (*) next 2 the #'s are my answers! ! ! 1) Find the percent...
- Math Help! - 1.Find the percent of decrease. Round your answer to the nearest ...
- Math Help! - 1.Find the percent of decrease. Round your answer to the nearest ...
- Kennedy king finance - 10. Compute the present value of $3,000 paid in four ...
- Finance - 10. Compute the present value of $3,000 paid in four years using the ...
- Kennedy King finance - 9. Compute the present value of $4,000 paid in five years...
- Finance math - 9. Compute the present value of $4,000 paid in five years using ...
- Finance/Math - 1. Present Values. Compute the present value of a $100 cash flow ...