ms of sale of 3/25, net 50. Calculate the effective annual rate. a-1. Calculate the effective annual rate if the terms are changed to 4/25, net 50. a-2. What effect does an increase in the discount rate have on the implicit interest rate charged to customers that pass up the discount? b-1. Calculate the effective annual rate if the ter
Required:
a. A firm currently offers terms of sale of 3/25, net 50. Calculate the effective annual rate.
a-1. Calculate the effective annual rate if the terms are changed to 4/25, net 50.
a-2. What effect does an increase in the discount rate have on the implicit interest rate charged to customers that pass up the discount?
b-1. Calculate the effective annual rate if the terms are changed to 3/35, net 50.
b-2. What effect does a decrease in the extra days of credit have on the implicit interest rate charged to customers that pass up the discount?
c-1. Calculate the effective annual rate if the terms are changed to 3/25, net 40.
c-2. Is there any difference between the implicit interest rate for terms of 3/35, net 50 and 3/25, net 40?
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