alculate the APR and rEAR of non-free trade credit associated with credit terms of 3/25, net 85, and 2.5/15, net 60, assuming that customers who do not take the discount a. pay on the last due date. Assume there are 360 days in a year. Do not round intermediate calculations. Round your answers to two decimal places. Credit terms of APR TEAR 3/25, net 85 APR TEAR b. delay payment until 15 days after the last due date. Assume there are 360 days in a year. Do not round intermediate calculations. Round your answers to two decimal places. % % 3/25, net 85 2.5/15, net 60 Credit terms of % % 2.5/15, net 60 % % % %

alculate the APR and rEAR of non-free trade credit associated with credit terms of 3/25, net 85, and 2.5/15, net 60, assuming that customers who do not take the discount a. pay on the last due date. Assume there are 360 days in a year. Do not round intermediate calculations. Round your answers to two decimal places. Credit terms of APR TEAR 3/25, net 85 APR TEAR b. delay payment until 15 days after the last due date. Assume there are 360 days in a year. Do not round intermediate calculations. Round your answers to two decimal places. % % 3/25, net 85 2.5/15, net 60 Credit terms of % % 2.5/15, net 60 % % % %

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 7P: Calculate the nominal annual cost of nonfree trade credit under each of the following terms. Assume...

See similar textbooks

Related questions

Q: . A buyer does not take advantage of a supplier's credit terms of 2/10, n/30 but pays in full at the…

A: Companies often encourage their customers to pay early of their dues by introducing trade discounts.…

Q: Assume the credit terms offered to your firm by your suppliers are 2/20, net 40. Calculate the…

A: Discount rate (r) = 0.02 Discount days (D) = 20 Credit term (C) = 40 Cost of trade credit = ?

Q: rade credit terms of 2/10, net 90 are available. Calculate the cost of trade credit when payment is…

A: The cost of trade credit is the cost that has been faced by the supplier to issue the goods on…

Q: In the credit terms 1/10, n/30, what does the "1" represent? Group of answer choices number of days…

A: Solution Concept Meaning of term credit terms 1/10, n/30, It means that if the payment is made…

Q: What are the nominal and effective costs of trade credit under the credit terms of 2/20, net 35?…

A: Credit terms specify the rate of discount a business can obtain when full payment is made within the…

Q: What do the credit terms, 2/15, n/30 mean? Multiple Choice A two percent discount can be deducted if…

A: The purchase invoice contains the various terms related to the payment to the supplier. It tells…

Q: Nominal cost of trade credit: % Effective cost of trade credit

A: Nominal cost of trade credit is given by the following formula : = [(Discount % / 100 - Discount…

Q: 2/15, net 20 1/10, net 45 3/15, net 45 2/ 10, net 50 2/15, net 35

A: in this we have to use cost of trade credit Cost of trade credit =Discount rate/(1-Discount rate )…

Q: What are the nominal and effective costs of trade credit under the credit terms of 4/10, net 40?…

A: Given: 4/10, net 40. Number of days in a year = 365 ------------------------- 4/10, net 40 refers to…

Q: Assume the credit terms offered to your firm by your suppliers are 2/15, net 30 . Calculate the cost…

A: Discount % = 2% Credit Period = 30 daysDiscount Period = 15 daysNumber of day in a year = 365

Q: McEwan Industries sells on terms of 3/10, net 40. Total sales for the year are $1,912,500; 40% of…

A: Days Sales Outstanding (DSO) is a term used to describe the average time it takes for a business to…

Q: One of your customers is delinquent on his accounts payable balance. You've mutually agreed to a…

A: The concept of time value of money will be used here. As per the concept of time value of money the…

Q: If a credit card you are interested in has an APR of 24%, what would the Daily Periodic Rate (DPR)…

A: The Annual Percentage rate (APR) is the percentage rate that shows the interest rate calculates on…

Q: Big Dom's Pawn Shop charges an interest rate of 25.5 percent per month on loans to its customers.…

A: Solution (A) APR is the interest rate per period times the number of periods in a year APR = 12…

Q: Trade credit terms of 2/10, net 90 are available. Calculate the cost of trade credit when payment is…

A: Trade credit is an important source of liquidity and financing for any company. The company needs to…

Q: PLEASE SHOW ALL WORK For terms of 8/10, n/60 determine the annual rate you, in effect, pay the…

A: Credit terms = 8/10 , n/60 means if payment is made within 10 days then supplier will offer 8%…

Q: be entéréd as 5678.00. Day Activity Adjustment Closing Balance 1 7500 11 Payment -500 7000 21…

A: In this we have to calculate total monthly balance and than find out average daily balance.

Q: Calculate the missing information for the following loan. Round days to the next higher day when…

A: Exact interest method is different from ordinary interest method. The difference is no of days…

Q: 1.3 REQUIRED Use the information given below to determine the cost (as a percentage, expressed to…

A: Discount means the amount which is not required to be paid or received.Discount is deducted to find…

Q: Nominal cost of trade credit: % Effective cost of trade credit: %

A: Nominal cost of trade credit = = [(Discount % / 100 - Discount %) *(365 / (Days credit outstanding -…

Q: An invoice dated January 25 with terms 2/10 -20 X. Find the final discount rate and the next payment…

A: The invoice is dated 25th January. The payment terms are 2/10 -20 X. Which are to be read as 2%…

Q: Ricky Ripov’s Pawn Shop charges an interest rate of 18.25 percent per month on loans to its…

A: APR (Annual Percentage Rate) and EAR (Effective Annual Rate) are two ways of measuring the cost of…

Q: Calculate the nominal annual cost of no free trade credit under each of the following terms. Assume…

A: Note: As per our guidelines, we can only solve up to 3 subparts. Please post other parts separately.

Q: Best Credit offer a credit card with an annual percentage rate of 14.98%, a 30 day statement period…

A: Credit card availment is the facility which is allowed to the holder of account in banks to take…

Q: (Related to Checkpoint 18.2) (Evaluating trade credit discounts) If a firm buys on trade credit…

A: > Given:> Discount = 5%> Discount period = 15 days> Total period = 90 days

Q: Which of the following terms of trade credit is the more expensive? a. A 3 percent cash discount if…

A: Calculating the effective annual interest rate for the credit terms 3/15, net 45. We have,The…

Q: If a supplier quotes you terms of 1.5% discount for payment of an account within 21 days or net 60…

A: The formula used for computing the effective cost of interest if the individual does not pay in 60…

Q: What does "2/10" mean, with respect to "credit terms of 2/10, n/30"? A. A discount of 2…

A: Given, credit terms = 2/10, n/30 n/30 indicates that the payment should be made within 30 days from…

Q: Match the following credit terms with the correct description. APR [Choose ] [Choose Known as the…

A: Since you have posted a question with multiple sub-parts, we will solve the first three subparts for…

Q: Big Dom’s Pawn Shop charges an interest rate of 26.8 percent per month on loans to its customers.…

A: APR gives an idea of the average annual cost of borrowing while EAR represents the actual annual…

Q: Calculate the APR and rEAR of non-free trade credit associated with credit terms of 3/20, net 65,…

A: Trade credit is a kind of short term financing for buyers and it helps in improving their cash…

Concept explainers

Trade Credit

Answer- a- Before Shipping of goods

Question

Calculate the APR and rEAR of non-free trade credit associated
with credit terms of 3/25, net 85, and 2.5/15, net 60, assuming
that customers who do not take the discount
a. pay on the last due date. Assume there are 360 days in a
year. Do not round intermediate calculations. Round your
answers to two decimal places.
Credit terms of
APR
TEAR
3/25, net 85
APR
TEAR
b. delay payment until 15 days after the last due date. Assume
there are 360 days in a year. Do not round intermediate
calculations. Round your answers to two decimal places.
%
%
3/25, net 85
2.5/15, net 60
Credit terms of
%
%
%
%
2.5/15, net 60
%
%

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1: Explanation of trade credit

VIEW

Step 2: Formula used in the calculation

VIEW

Step 3: a. Calculation of the APR and the rEAR

VIEW

Step 4: b. Calculation of the APR and the rEAR

VIEW

Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 5 steps with 9 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Calculate the APR and rEAR of non-free trade credit associated with credit terms of 3/20, net 65, and 2.5/15, net 75, assuming that customers who do not take the discount pay on the last due date. Assume there are 360 days in a year. Do not round intermediate calculations. Round your answers to two decimal places. Credit terms of 3/20, net 65 2.5/15, net 75 APR % % rEAR % % delay payment until 15 days after the last due date. Assume there are 360 days in a year. Do not round intermediate calculations. Round your answers to two decimal places. Credit terms of 3/20, net 65 2.5/15, net 75 APR % % rEAR % %
Calculate the APR and rEAR of non-free credit asscoiated with credit terms of 3/10 net 50, and 2.5/15 net 45 assuming that customers who do not take the discount (a) pay on the last due date and (b) delay payment until 10 day after the due date. I submitted this question and was asked to resubmit as it seemed to be missing information. This is the only information given in the problem.
Calculate the nominal annual cost of nonfree trade credit under each of the following terms. Assume that payment is made either on the discount date or on the due date. a. 1/15, net 20 b. 2/10, net 60 c. 3/10, net 45 d. 2/10, net 45 e. 2/15, net 40
If a credit card you are interested in has an APR of 24%, what would the Daily Periodic Rate (DPR) be? (express your answer as a percent) 0.24% 0.000658% O 2% O 0.0658%
PLEASE SHOW ALL WORK For terms of 8/10, n/60 determine the annual rate you, in effect, pay the supplier if you fail to pay the invoice at the end of the discount period. Express the rate with 2 decimal places.
Calculate the missing information on the following revolving credit accounts. Interest is calculated on the unpaid or previous month's balance. Do not enter the percent symbol in your answer. Round your answers for finance charge and new balance to the nearest cent. Annual Monthly Purchases Payments Previous Percentage Periodic Finance and Cash and New Balance Rate (APR) Rate Charge Advances Credits Balance $862.25 0.25% $156.80 $417.00
Calculate the missing information for the following loan. Round days to the next higher day when necessary. Do not enter units in your answer. Do not round intermediate calculations. Principal Rate (%) Time (days) Interest Method Interest Maturity Value $ 60,000 10.6 Exact $3,800 $63,800
Using the table, what is the average daily balance of the credit card for the November 1 - November 30 billing period? Round your answer to the nearest cent.Do not include a dollar sign or comma in your answer. For example, $5, 678.00 should be entered as 5678.00. Day Activity Adjustment Closing Balance 1 7500 11 Payment -500 7000 21 Payment -750 6250 30 Purchase +250 6500
Assume the credit terms offered to your firm by your suppliers are 4/15, net 30. Calculate the cost of the trade credit if your firm does not take the discount and pays on day 30
Your bank account pays interest with an EAR of 4%. What is the APR quote for this account based on semiannual compounding? What is the APR with monthy son eTe compounding? (Note Be careful not to round any intermediate steps less than sir decimal places) tnmenti What is the APR quote for this account based on semiannual compoundng? The APR quote for the account with semiannual compounding in Round to thre decimal places) ilts Suppose the interest rate is 9.3% APR with monthly compounding What is the prosent value of an annulty that pays $00 every three months for four years? (Note: Be son ete careful not to round any intermedate steps less than six decimal places) pmenti The present value of the annuty is s (Round to the nearest cent) A payday loan is structured to obscure the true interest rate you are paying For example, in Washington, you pay a $32 "lee" for a two-week $205 payday loan (when on ele you repay the loan, you pay $237). What is the effective annual interest rate for…
(Related to Checkpoint 18.2) (Evaluating trade credit discounts) If a firm buys on trade credit terms of 5/15, net 90 and decides to forgo the trade credit discount and pay on the net day, what is the annualized cost of forgoing the discount (assume a 365-day year)? The annualized cost of the trade credit terms of 5/15, net 90 is %. (Round to two decimal places.)
What do the credit terms, 2/15, n/30 mean? Multiple Choice O A two percent discount can be deducted if the invoice is paid after the fifteenth day following the sale, but before the thirtieth day. A two percent discount can be deducted if the invoice is paid before the fifteenth day following the date of the sale. A fifteen percent discount can be deducted if the invoice is paid within two days following the date of sale. A two percent discount can be deducted for a period up to thirty days following the date of sale.