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Aunt May Inc.'s business is booming. and it needs to raise more capital. The company purchases supplies on terms of 2/10 net 20. and it currently takes

Aunt May Inc.'s business is booming. and it needs to raise more capital. The company purchases supplies on terms of 2/10 net 20. and it currently takes

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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During computation, you may round your integer data to two decimal places and your percentages and present value factors to four decimal places.
Aunt May Inc.s business is booming. and it needs to raise more capital. The company purchases supplies on terms of 2/10, net 20, and it currently takes the discount. One way of acquiring the needed funds would be to forgo the discount, and the firm's owner believes she could delay payment to 40 days without adverse effects. What would be the effective annual percentage cost of funds raised by this action? (Assume a 365-day year.) (Please answer this percentage in amount with two decimal points e.g. xx.XX; do not denote percentage anymore; payable turnover may be rounded to two decimal places)
Transcribed Image Text:Aunt May Inc.s business is booming. and it needs to raise more capital. The company purchases supplies on terms of 2/10, net 20, and it currently takes the discount. One way of acquiring the needed funds would be to forgo the discount, and the firm's owner believes she could delay payment to 40 days without adverse effects. What would be the effective annual percentage cost of funds raised by this action? (Assume a 365-day year.) (Please answer this percentage in amount with two decimal points e.g. xx.XX; do not denote percentage anymore; payable turnover may be rounded to two decimal places)
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