A company purchases under terms of 1.5/10, net 30, meaning they receive a 1.5% discount if they pay within 10 days but must pay the full amount within 30 days. If the company decides to delay payment for an additional 15 days (total 45 days) without penalty, what is the effective annual cost of trade credit? Assume 365 days in a year, and round to two decimal places.

A company purchases under terms of 1.5/10, net 30, meaning they receive a 1.5% discount if they pay within 10 days but must pay the full amount within 30 days. If the company decides to delay payment for an additional 15 days (total 45 days) without penalty, what is the effective annual cost of trade credit? Assume 365 days in a year, and round to two decimal places.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter21: Supply Chains And Working Capital Management

Section: Chapter Questions

Problem 10P: The D.J. Masson Corporation needs to raise $500,000 for 1 year to supply working capital to a new...

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