Paul Stetson is offered credit terms of 3/10 net 40 by his suppliers. Paul, however, usually pays in 35 days. He is now considering borrowing money from his bank in order to take advantage of the cash discount being offered. His bank is willing to lend him $30,000 for 180 days by way of a discounted loan with an interest cost of $5,000. Required: Advise Paul Stetson on what he should do giving your reason.

Paul Stetson is offered credit terms of 3/10 net 40 by his suppliers. Paul, however, usually pays in 35 days. He is now considering borrowing money from his bank in order to take advantage of the cash discount being offered. His bank is willing to lend him $30,000 for 180 days by way of a discounted loan with an interest cost of $5,000. Required: Advise Paul Stetson on what he should do giving your reason.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 19P

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