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Name: Credit terms of 4/30, net 90 days have been given to the Orchids Incor
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Description: Credit terms of 4/30, net 90 days have been given to the Orchids Incorporated. What is the nominal annual percentate cost of the non-free trade credit if it pays within 120 days of purchase? (assume a calendar year of 365 days)

Business

Accounting

What is the nominal annual percentate cost of the non-free trade credit if it pays within 120 days of purchase

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 8P: If a firm buys on terms of 3/15, net 45, but actually pays on the 20th day and still takes the...

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Concept explainers

Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.

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Credit terms of 4/30, net 90 days have been given to the Orchids Incorporated. What is the nominal annual percentate cost of the non-free trade credit if it pays within 120 days of purchase? (assume a calendar year of 365 days)

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