; 80% of Nadak's accounts receivable are paid within the discount period. Required: a. What is the total amount of cash discounts allowed in a year? b. Calculate the approximate annual rate of return on investment that Nadak Co.’s cash discount terms represent to customers who take the discount. (Assume a credit period of 30 days and 360-days year). (Round intermediate calculations to 2 decimal pl

; 80% of Nadak's accounts receivable are paid within the discount period. Required: a. What is the total amount of cash discounts allowed in a year? b. Calculate the approximate annual rate of return on investment that Nadak Co.’s cash discount terms represent to customers who take the discount. (Assume a credit period of 30 days and 360-days year). (Round intermediate calculations to 2 decimal pl

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter13: Other Financing Alternatives

Section: Chapter Questions

Problem 1bM

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Question

Annual credit sales of Nadak Co. total $337.3 million. The firm gives a 2.25% cash discount for payment within 10 days of the invoice date; 80% of Nadak's accounts receivable are paid within the discount period.

Required:

a. What is the total amount of cash discounts allowed in a year?

b. Calculate the approximate annual rate of return on investment that Nadak Co.’s cash discount terms represent to customers who take the discount. (Assume a credit period of 30 days and 360-days year). (Round intermediate calculations to 2 decimal places. Enter your answer as a percentage rounded to 1 decimal place (i.e., 32.1).)

Definition Definition Money that the business will be receiving from its clients who have utilized the credit provided to buy its goods and services. The credit period typically lasts for a short term, lasting from a few days, a few months, to a year.

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