In This Problem,use the Approximation Formula to Find the Cost

question 58

Multiple Choice

In this problem,use the approximation formula to find the cost of trade credit.A firm's payments policy calls for stretching payments to its supplier,who sells on terms of 3/20,net 60.Payment is made in 90 days,and the cash saved is invested in a money market mutual fund paying 12 percent interest.This policy is __________ because the firm has a net __________.

• A) Profitable; gain of about 9 percent on the funds involved.
• B) Profitable; gain of about 12 percent on the funds involved.
• C) Unprofitable; loss of about 4 percent on the funds involved.
• D) Unprofitable; loss of about 9 percent on the funds involved.
• E) Insufficient information to solve.

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Definitions:

Disfiguring

Causing physical damage or alteration to the appearance of something, often in a way that is considered unattractive or unpleasant.

Nature Dimension

Describes aspects of the physical environment and how they influence organisms and ecosystems.

Duration Aspect

A term relating to the time length during which an event, policy, or condition lasts or is expected to last, often used in planning and analysis.

Aesthetic Aspect

The branch of philosophy concerned with the nature and appreciation of art, beauty, and good taste.