Question 10

1. Many vendors offer early payment discounts. Some accounts payable supervisors do not believe in paying early "as the bank overdraft rate of 6% pa is more than the average 1% offered for early payment within 15 days from date of invoice". The supervisors often stretch the accounts, for example to 40 days from the last date of early payment discount. If average creditors terms are 2%, 15: net 30, what is the minimum number of days from the invoice date that accounts must be stretched to make stretching a viable alternative? Use the Nominal formula.