QUESTION 5 A firms purchases $5,562,500 in goods over a 1-year period from its sole supplier. The supplier offers trade credit under the following terms: 2/15, net 50 days. The company finally chooses to pay on time (pay in the 50th day) but not to take the discount. We assume 365 days per year. What is the average level of the companys free trade credit?

$187,500

$228,596

$15,240

$5,562,500

QUESTION 6 Based on the information from Question 5, what is the average level of the companys costly trade credit?

$15,240

$437,500

$533,390

$5,562,500

QUESTION 7

Based on the information from Question 5, what is the nominal annual cost of the firms costly trade credit? 17.6% 21.3% 23.5% 25.2% 4 points QUESTION 8 Based on the information from Question 5, what is the effective annual cost of the firms costly trade credit?

17.6%

21.3%

23.5%

25.2%