Annual credit sales of Nadak Company total $240 million. The firm gives a 2% cash discount for payment within 10 days of the invoice date; 90% 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 Company's cash discount terms represent to customers who take the discount. (Assume a credit period of 30 days and 360-days year). Answer is complete but not entirely correct. $ 4.32 million a. Total amount b. ROI 37%
Annual credit sales of Nadak Company total $240 million. The firm gives a 2% cash discount for payment within 10 days of the invoice date; 90% 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 Company's cash discount terms represent to customers who take the discount. (Assume a credit period of 30 days and 360-days year). Answer is complete but not entirely correct. $ 4.32 million a. Total amount b. ROI 37%
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Annual credit sales of Nadak Company total $240 million. The firm gives a 2% cash discount for payment within 10 days of the invoice
date; 90% 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 Company's cash discount terms represent to customers
who take the discount. (Assume a credit period of 30 days and 360-days year).
Answer is complete but not entirely correct.
$
a. Total amount
b. ROI
4.32
37
million
%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F582967b2-8150-4aa5-855d-1cfe6600166f%2F4b5ac4b9-0d4a-4fd6-bf90-eeed56df042e%2F3egdfwu_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Annual credit sales of Nadak Company total $240 million. The firm gives a 2% cash discount for payment within 10 days of the invoice
date; 90% 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 Company's cash discount terms represent to customers
who take the discount. (Assume a credit period of 30 days and 360-days year).
Answer is complete but not entirely correct.
$
a. Total amount
b. ROI
4.32
37
million
%
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