Company X sells on a 2/15, net 90, basis. Company Y buys goods with an invoice of $1,000. a. How much can company Y deduct from the bill if it pays on day 15? (Do not round intermediate calculations.) b. How many extra days of credit can company Y receive if it passes up the cash discount? c. What is the effective annual rate of interest if Y pays on the due date rather than day 15? (Use 365 days in a year. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Company X sells on a 2/15, net 90, basis. Company Y buys goods with an invoice of $1,000. a. How much can company Y deduct from the bill if it pays on day 15? (Do not round intermediate calculations.) b. How many extra days of credit can company Y receive if it passes up the cash discount? c. What is the effective annual rate of interest if Y pays on the due date rather than day 15? (Use 365 days in a year. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 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 8P: If a firm buys on terms of 3/15, net 45, but actually pays on the 20th day and still takes the...

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Question

Company X sells on a 2/15, net 90, basis. Company Y buys goods with an invoice of $1,000.

a. How much can company Y deduct from the bill if it pays on day 15? (Do not round intermediate calculations.)

b. How many extra days of credit can company Y receive if it passes up the cash discount?

c. What is the effective annual rate of interest if Y pays on the due date rather than day 15? (Use 365 days in a year. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

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Part (a) Calculation of the company Y deduct from the bill if it pays on day 15 is as follow:

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Part (b) Calculation of extra days of credit if it passes up the cash discount is as follow:

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Part (c) Calculation of the effective annual rate is as follow:

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