Howes Inc. purchases $4,562,500 in goods per year from its sole supplier on terms of 2/15, net 50. If the firm chooses to pay on time but does not take the discount, what is the effective annual percentage cost of its non-free trade credit? (Assume a 365- day year.)

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 10P: The D.J. Masson Corporation needs to raise $500,000 for 1 year to supply working capital to a new...
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What is the effective annual percentage cost of its non-free trade credit?

Howes Inc. purchases $4,562,500 in
goods per year from its sole supplier
on terms of 2/15, net 50. If the firm
chooses to pay on time but does not
take the discount, what is the
effective annual percentage cost of its
non-free trade credit? (Assume a 365-
day year.)
Transcribed Image Text:Howes Inc. purchases $4,562,500 in goods per year from its sole supplier on terms of 2/15, net 50. If the firm chooses to pay on time but does not take the discount, what is the effective annual percentage cost of its non-free trade credit? (Assume a 365- day year.)
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