The Thompson Corporation projects an increase in sales from $2 million to $3 million, but it needs an additional $300,000 of current assets to support this expansion. Thompson can finance the expansion by no longer taking discounts, thus increasing accounts payable. Thompson purchases under terms of 3/10, net 30, but it can delay payment for an additional 35 days paying in 65 days and thus becoming 35 days past due - without a penalty because of its suppliers' currently have excess capacity. What is the effective, or equivalent, annual cost of the trade credit? (Round your answers to two decimal places. Assume 365 days in year for your calculations. Do not round intermediate calculations.)

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 16P: The Thompson Corporation projects an increase in sales from 1.5 million to 2 million, but it needs...
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Please need answer the general accounting question

The Thompson Corporation projects an increase in sales from
$2 million to $3 million, but it needs an additional $300,000 of
current assets to support this expansion. Thompson can
finance the expansion by no longer taking discounts, thus
increasing accounts payable. Thompson purchases under
terms of 3/10, net 30, but it can delay payment for an additional
35 days paying in 65 days and thus becoming 35 days past
due - without a penalty because of its suppliers' currently have
excess capacity.
What is the effective, or equivalent, annual cost of the trade
credit? (Round your answers to two decimal places. Assume
365 days in year for your calculations. Do not round
intermediate calculations.)
Transcribed Image Text:The Thompson Corporation projects an increase in sales from $2 million to $3 million, but it needs an additional $300,000 of current assets to support this expansion. Thompson can finance the expansion by no longer taking discounts, thus increasing accounts payable. Thompson purchases under terms of 3/10, net 30, but it can delay payment for an additional 35 days paying in 65 days and thus becoming 35 days past due - without a penalty because of its suppliers' currently have excess capacity. What is the effective, or equivalent, annual cost of the trade credit? (Round your answers to two decimal places. Assume 365 days in year for your calculations. Do not round intermediate calculations.)
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