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Please show all your work in text if possible to help me better understand how you derived to the answer
Please show all your work in text if possible to help me better understand how you derived to the answer. Thank you in advance.
North Folk Dairy has an unused bank revolving credit of $50 million. North Folk Dairy’s vendor provided an invoice in the amount of $100,000 with payment terms of 2/10, net 45. Compute the nominal cost of not taking the cash discount of 2/10, net 45. If North Folk Dairy does not have sufficient internal funds, what is an option for North Folk Dairy to obtain funds to take the discount?
Expert Solution
1) Nominal Cost of Not taking cash Discount
=$100000×2%=$2000
2) North Folk Dairy has the option of unused Bank Revolving Credit line of $50 million.
This credit option to can be used to obtain funda and avail the discount.
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