1.A firm purchases merchandise on terms 2/15,net 40 days. It does not take discounts, and it typically pays on time,40 days after the invoice date. Net Purchases amount to 784,000 per year. Assume a 365 day year,and note that purchases are net of discounts.

What are the amounts of free trade credit and costly trade credit the firm receives during the year?

2. Suppose the credit terms offered to your firm by its suppliers 2/10,net 30 days. Your firm it's not taking discounts but its paying after 25 days instead of waiting until day 30. You point out that the nominal cost of not taking the discount and paying on day 30 is approximately 37%. But since your firm is neither taking discounts nor paying on the due date,what is the effective annual percentage cost of it's non free trade credit, using a 365 day year?