Jackson Automotive Inc. of California agrees to sell specialized automotive parts to Hidatsi of Korea....
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Jackson Automotive Inc. of California agrees to sell specialized automotive parts to Hidatsi of Korea. Because the two companies have never done business with each other, Jackson requires a banker's acceptance as payment for the $1,000,000 order. The banker's acceptance carries a 2.0% commission per annum and payment is to be received in 3 months. If Jackson Inc. chooses to discount or sell the bankers acceptance to its bank, the discount rate is 1.00% per annum.
What is the size of the discount (not including the commission fee) Jackson must take for receiving the proceeds of the sale today rather than waiting for six months?
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