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a. What is the total amount of cash discounts allowed in a year? (Enter your answer in millions rounded to 2 decimal places.)         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 p

a. What is the total amount of cash discounts allowed in a year? (Enter your answer in millions rounded to 2 decimal places.)         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 p

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Exercise 5-13 (Algo) Cash discounts—ROI LO 5

Annual credit sales of Nadak Co. total $363 million. The firm gives a 2.75% 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? (Enter your answer in millions rounded to 2 decimal places.)

 

 

 

 

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).)

 

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