Arkansas Technology Incorporated (ATI) purchases goods from its suppliers on terms of 3/15,

net 40. (5 marks)

a) Explain in your words what those credit terms mean? (1 mark)

b) What is the effective annual cost (in %) to ATI if they choose not to take the discount and pay at 40 days? (2 marks)

c) What is the effective annual cost to ATI if they choose not to take the discount and will pay their invoice after 50 days (assuming they will be no penalty for late payment)? (2 marks)