Value of extended credit terms?

[kimroenn]

Hi all

Please help me to solve this problem:

A vendor offers to extend the payment terms from 20 days to 60 days. With a monthly spend of 100$ and a WACC of 7%/year how do I calculate the value to me of those extra 40 days of credit?

Thank you for your assistance.

/Kim

 

[HallsofIvy]

So you can keep that $100 for an additional 60 days. How much will $100 earn in 60 days at 7% annual interest?

 

[JeffM]

Hi all

Please help me to solve this problem:

A vendor offers to extend the payment terms from 20 days to 60 days. With a monthly spend of 100$ and a WACC of 7%/year how do I calculate the value to me of those extra 40 days of credit?

Thank you for your assistance.

/Kim

What's the present value of $100 dollars 60 days from now at 7% p. a. (compounded how?)

What's the present value of $100 20 days from now?

What's the difference?

 

[JeffM]

Denis

If someone knows what the acronym WACC means, they presumably know how to compute present values.

 

[JeffM]

World Alliance for Christian Communication (WACC) ??

Well, can't see what Weighed Average Cost of Capital
has to do with a 40day add'l interest free period

Nothing. But someone who is tossing around that acronym should know how to do a present value computation.

 

[JeffM]

a WACC of 7%/year

Looks like the OP to me