Question
31.A firm purchases $4,562,500 in goods over a 1-year period from its sole supplier.The supplier offers trade credit under the following terms:2/15, net 50 days.Davis
31.A firm purchases $4,562,500 in goods over a 1-year period from its sole supplier.The supplier offers trade credit under the following terms:2/15, net 50 days.Davis finally chooses to pay on time (pay in the 50th day) but not to take the discount. We assume 365 days per year. What is the average level of the company's free trade credit?
a. $187,500
b. $437,500
c. $625,000
d. $4,562,500
32.Based on the information from Question 31, what is the average level of the company's total trade credit?
a. $187,500
b. $437,500
c. $625,000
d. $4,562,500
33.Based on the information from Question 31 and 32, what is the average level of the company's costly trade credit?
a. $187,500
b. $437,500
c. $625,000
d. $4,562,500
34.Based on the information from Question 31, what is the nominal annual cost of the firm's costly trade credit?
a. 17.6%
b. 21.3%
c. 23.5%
d. 25.2%
35.Based on the information from Question 31, what is the effective annual cost of the firm's costly trade credit?
a. 17.6%
b. 21.3%
c. 23.5%
d. 25.2%
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