Global Logistics Purchased a New Machine on October 20th,2019 for $1,000,000

question 1

Essay

Global Logistics purchased a new machine on October 20th,2019 for $1,000,000 on credit.The supplier has offered A&A terms of 2/10,net 45.The current interest rate the bank is offering is 16 percent.
(a)Compute the cost of giving up cash discount.
(b)Should the firm take or give up the cash discount?
(c)What is the effective rate of interest if the firm decides to take the cash discount by borrowing money on a discount basis?

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Definitions:

Anesthetic

An anesthetic is a substance that causes the loss of sensation, either locally or generally, to prevent pain during surgical procedures.

Anesthetic

A substance that induces insensitivity to pain, used during surgical procedures to induce loss of sensation or consciousness.

Insensibility

The lack of physical sensation or the inability to react to sensory stimuli.

Pain

An unpleasant sensory and emotional experience associated with actual or potential tissue damage.