Effective Cost of Trade Credit The D J Masson Corporation needs to raise $400,000 for 1 year to supply working capital to a new store Masson buys from its suppliers on terms of 1 10, net 70, and it currently pays on the 10th day and takes discounts However, it could forgo the discounts, pay on the 70th day, and thereby obtain the needed $400,000 in the form of costly trade credit What is the effective annual interest rate of this trade credit Assume a 365 day year Do not round intermediate calculations Round your answer to two decimal places

Question

Effective Cost of Trade Credit The D J  Masson Corporation needs to raise $400,000 for 1 year to supply working capital to a new store  Masson buys from its suppliers on terms of 1 10, net 70, and it currently pays on the 10th day and takes discounts  However, it could forgo the discounts, pay on the 70th day, and thereby obtain the needed $400,000 in the form of costly trade credit  What is the effective annual interest rate of this trade credit  Assume a 365 day year  Do not round intermediate calculations  Round your answer to two decimal places

Accepted Answer

The Answer is in the image, click to view ...

Question

Effective Cost of Trade Credit The D.J. Masson Corporation needs to raise $400,000 for 1 year to supply working capital to a new store. Masson

Step by Step Solution

Step: 1

Get Instant Access to Expert-Tailored Solutions

Step: 2

Step: 3

Ace Your Homework with AI

Students also viewed these Finance questions

Question

Question

Question

Question

Question

Question

Question

Question

Question