Provide detailed descriptions and show all calculations used to arrive at solutions for the following questions (Show your calculation to receive full credit):
1. Community Home Health has received an invoice for medical supplies for $7,000 with terms 2/10 net 30. What is the cost of not taking the discount?
2. What is the future value of $10,000 for an interest rate of 16% and 1 annual period of compounding? for an annual interest rate of 16% and 2 semiannual periods of compounding? for an annual interest rate of 16% and 4 quarterly periods of compounding? *Hint: calculate Future value using the Future Value formula and dividing the interest rate by the number of periods per year and also multiplying the exponents for the same number of periods per year) *Assume a 1 year investment.
3. Explain from your findings in problem 2 why the investment increases in value when the number of compounding periods increases?
4. An important source of temporary cash is trade credit, which does not actually bring in cash, but instead slows its outflow. Vendors often provide discounts for early payment. What is the formula to determine the effective interest rate if the discount is not utilized?
5. Columbus Clinic expects to receive $20,000 five years from now. As part of another contract, the clinic must make a payment of $30,000 on a loan six years from now. The clinic wants to set aside an amount today that, combined with the money received, will cover its obligation of $30,000. Assume that the clinic’s cost of capital is 7%. To the nearest hundred dollars, how much money does the clinic need to set aside today?