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St . Mary s Lodge is evaluating the cost of foregoing an early payment discount from one of their suppliers. The supplier is currently offering

St. Marys Lodge is evaluating the cost of foregoing an early payment discount from one of their suppliers. The supplier is currently offering St. Marys Lodge credit terms of 2/5, net 30. The average purchase price is $1,600 per order. What is the effective annual cost of foregoing the discount? If St. Marys Lodge can finance these purchases by using a loan that has an effective annual cost of 7 percent, should they take the discount and use the loan?

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