Sheffield Ltd's main supplier offers it credit terms of 1/10, n/40 on its purchases. Because cash flow is tight for Sheffield, the company's CFO is trying to determine what the annual interest rate would be if the company passes up this discount and pays at the end of the 40-day credit period instead. (Round answer to 2 decimal places, eg. 15.25) Annual interest rate 13.01 %

Sheffield Ltd's main supplier offers it credit terms of 1/10, n/40 on its purchases. Because cash flow is tight for Sheffield, the company's CFO is trying to determine what the annual interest rate would be if the company passes up this discount and pays at the end of the 40-day credit period instead. (Round answer to 2 decimal places, eg. 15.25) Annual interest rate 13.01 %

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 15P: Suppose a firm makes purchases of $3.65 million per year under terms of 2/10, net 30, and takes...

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f a firm buys under terms of 3/15, net 50, but actually pays on the 20th day and still takes the discount, what is the nominal cost of its nonfree trade credit? Assume a 365-day year. Do not round intermediate calculations. Round your answer to two decimal places. % Does it receive more or less credit than it would if it paid within 15 days? I. Paying after the discount period, but still taking the discount gives the firm less credit than it would receive if it paid within 15 days. II. Paying before the discount period and taking the discount gives the firm more credit than it would receive if it paid within 15 days. III. Paying after the discount period, but still taking the discount gives the firm more credit than it would receive if it paid within 15 days.
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