Trade Credit

The Thompson Corporation projects an increase in sales from $2.5 million to $3 million, but it needs an additional $200,000 of current assets to support this expansion. Thompson can finance the expansion by no longer taking discounts, thus increasing accounts payable. Thompson purchases under terms of 2/10, net 30, but it can delay payment for an additional 20 days - paying in 50 days and thus becoming 20 days past due - without a penalty because its suppliers currently have excess capacity. What is the effective, or equivalent, annual cost of the trade credit? Assume a 365-day year. Do not round intermediate calculations. Round your answers to two decimal places.

Nominal cost: %

Effective cost: %