(16–9)

Cost of Trade Credit Grunewald Industries sells on terms of 2/10, net 40. Gross sales last year were

$4,562,500 and accounts receivable averaged $437,500. Half of Grunewald’s customers paid on the 10th day and took discounts. What are the nominal and effective costs of trade credit to Grunewald’s nondiscount customers? (Hint: Calculate sales/

day based on a 365-day year, then calculate average receivables of discount customers, and then find the DSO for the nondiscount customers.)