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A firm offers a prompt settlement discount of 1% to its debtors for accounts settled within ten days of the invoice date. What is the
A firm offers a prompt settlement discount of 1% to its debtors for accounts settled within ten days of the invoice date. What is the annualised cost of the discount as a percentage of the funds obtained through prompt settlement? Assume: (i) annual compounding; (ii) that debtors taking the discount will pay on the tenth day after the invoice date and that those who dont take the discount pay 33 days after the invoice date
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