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Q4. Murtaugh Manufacturing sells on terms of 2/5, net 40. Total annual sales dre $950,000. 40% of the customers pay on the 5th day and
Q4. Murtaugh Manufacturing sells on terms of 2/5, net 40. Total annual sales dre $950,000. 40% of the customers pay on the 5th day and take discounts, and the remainder pay, on average, 50 days after their purchases. All sales and receivables are recorded net of discounts, regardless of whether or not discounts are actually taken. a. What is the firm's average accounts receivable balance? b. What should the nominal cost of trade credit be to those customers who do not take discounts, based on a 365 day year, assuming that they pay on time, even though they do not? c. What is the actual nominal cost of trade credit to those customers who do not take discounts, based on a 365 day year, recognizing that they do not pay on time? d. What is the effective cost of trade credit to those customers who do not take discounts, based on a 365 day year, recognizing that they do not pay on time
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