Question

Memphis Metro just made a $75,000 purchase from a supplier, subject to the extension of suit-able trade credit terms. Using a discount rate of 7%, calculate the present value of this cash outflow assuming trade credit terms ofa.30 daysb.45 daysc.60 daysd.90 days

Answer 1

The Calculation of the Present Value of this cash outflow assuming trade credit terms of a.30 days b.45 days c.60 days d.90 days would be the following:

a.30 days is $74,625

b.45 days is $74,325

c.60 days is $74,100

d.90 days is $73,725

Step-by-step explanation:

The Calculation of the Present Value of this cash outflow assuming trade credit terms of a.30 days b.45 days c.60 days d.90 days would be the following:

a. 30Days

Present Value =Future Value/(1+r)^n

$75,000/(1.07)^30/365

$75,000*.995

Present Value =$74,625

b. 45 Days

Present Value =Future Value/(1+r)^n

$75,000/(1.07)^45/365

75,000*.991

Present Value =$74,325

c. 60Days

Present Value =Future Value/(1+r)^n

$75,000/(1.07)^60/365

$75,000*.988

Present Value =$74,100

d.90 Days

Present Value =Future Value/(1+r)^n

$75,000/(1.07)^90/365

$75,000*.983

Present Value =$73,725