BA350 Practical Financial Management: P6-6 Branson, Inc. has sold product to the Brandywine Company

BA350 Practical Financial Management

P6-6
Branson, Inc. has sold product to the Brandywine Company, a major customer, for $20,000. As a courtesy to Brandywine, Branson has agreed to take a note due in two years for half of the amount due.

a. What is the effective price of the transaction to Branson if the interest rate is: (1) 6%, (2) 8%, (3) 10%, or (4) 12%?
b. Under what conditions might the effective price be even less as viewed by Brandywine?
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