Interest rate on notes payable is 10 and tax rate is 40. if, Ask an Expert

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1) Gonzales Company currently uses maximum trade credit by not taking discounts on its purchases. Standard industry credit terms offered by all its suppliers are 2/10, net 30 days, and firm pays on time. New CFO is considering borrowing from its bank, by using short-term notes payable, and then taking discounts. Firm wants to find out effect of this policy change on its net income. Its net purchases are $11,760 per day, using a 365-day year. Interest rate on notes payable is 10%, and tax rate is 40%. If firm implements the plan, what is expected change in net income?

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