Question
A company has daily purchases of $10,000 from its supplier. The supplier offers trade credit under the following terms: 3/20, net 50 days. The company
A company has daily purchases of $10,000 from its supplier. The supplier offers trade credit under the following terms: 3/20, net 50 days. The company 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 companys free trade credit?
$30,000 | ||
$170,000 | ||
$200,000 | ||
$300,000 |
Use above info to answer, what is the average level of the companys total trade credit?
$170,000 | ||
$200,000 | ||
$300,000 | ||
$500,000 |
Use above info to, what is the average level of the companys costly trade credit?
$170,000 | ||
$200,000 | ||
$300,000 | ||
$500,000 |
Use above info to, what is the nominal annual cost of the firms costly trade credit?
28.6% | ||
29.3% | ||
33.5% | ||
37.6% |
Use the above info to, what is the effective annual cost of the firms costly trade credit?
35.8% | ||
37.6% | ||
39.5% | ||
44.9% |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started