# 10184

Neveready Flashlights Inc. needs $317,000 to take a cash discount of 3/15, net 70. A banker will loan the money for 55 days at an interest cost of $13,200.

**a.** What is the effective rate on the bank loan? **(Use a 360-day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)**

**b.** How much would it cost (in percentage terms) if the firm did not take the cash discount but paid the bill in 70 days instead of 15 days? **(Use a 360-day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) **

**c.** Should the firm borrow the money to take the discount?

No Yes

**d.** If the banker requires a 20 percent compensating balance, how much must the firm borrow to end up with the $317,000?

**e-1.** What would be the effective interest rate in part *d* if the interest charge for 55 days were $7,200? **(Use a 360-day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) **

**e-2.** Should the firm borrow with the 20 percent compensating balance requirement? (The firm has no funds to count against the compensating balance requirement.)

No Yes