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Hi Sir, can you please explain part b?I got the total amount saved and the cost of discount. May I know when calculating the max discount why it take the total amount saved of $1050000 but not taken the net amount saved of $831000?this part very confusing for me, hope sir can explain further?
The net benefit is $831,000 because they are saving 1,050,000 from receivables paying early but are losing $219,000 due to the discount.
The maximum discount they could offer would be when there was no net benefit (and no net cost) which is when the cost of the discount is equal to the saving of $1,050,000.
Hi Sir, can u please comment my understand is it correct?
the question asked to find out the max discount can offer means that we should not including the original cost of discount 1%. Because we going to find out the max discount and it is not fair to include the cost of discount 1%, thus we should take the benefit amount ex cost of discount.
Am I right? thank you very much?
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