Mavericks Cosmetics buys $3,305,717 of product (net of discounts) on terms of 5/10, net 60, and it currently pays on the 10th day and takes discounts. Mavericks plans to expand, and this will require additional financing. If Mavericks decides to forego discounts, what would the effective percentage cost of its trade credit be, based on a 365- day year?

Mavericks Cosmetics buys $3,305,717 of product (net of discounts) on terms of 5/10, net 60, and it currently pays on the 10th day and takes discounts. Mavericks plans to expand, and this will require additional financing. If Mavericks decides to forego discounts, what would the effective percentage cost of its trade credit be, based on a 365- day year?

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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Trade Credit

Answer- a- Before Shipping of goods

Question

Mavericks Cosmetics buys
$3,305,717 of product (net of
discounts) on terms of 5/10, net 60,
and it currently pays on the 10th day
and takes discounts. Mavericks plans
to expand, and this will require
additional financing. If Mavericks
decides to forego discounts, what
would the effective percentage cost
of its trade credit be, based on a 365-
day year?
Answer in % terms to 2 decimal
places.

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