Answer:
a) 10,000 free trade credit
b) Costly trade 6.466,67
c) yearly cost 38,800
d) Yes as the total cash outflow to purchase the goods is lower using costly trade
e) The complete amount as it reduces the cashflow needed for the acquisition of the goods
Explanation:
principal x rate x time = interest
Where rate and time should be expressed in the same metric thus, we express the 60 days as portion of a year
500,000 x 0.12 x 60/360 = 10,000 free trade credit
<em><u>costly trade:</u></em>
500,000 x 0.97 = 485,000
485,000 x 0.12 x 40/360 = 6.466,67
cost per year: the cicle repeats every 60 days thus, 6 times per year:
6,466.67 x 6 = 38.800
total financial outflow:
with free credit: 500,000
with costly trade: 485,000 + 6,466.67 = 491.466,67
As the costly trade generated a lower cash flow it should take this path
