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You have just purchased some goods and have received a $1,000 invoice. The invoice has credit terms of 2/10 n45. If you pay the
You have just purchased some goods and have received a $1,000 invoice. The invoice has credit terms of 2/10 n45. If you pay the invoice on the net day, what is your annualised percentage cost of credit? (a) 2.04% (b) 20.24% (c) 23.45% (d) 27.86% (e) 37.24% Question 16 When compared to a bank overdraft, the annual percentage cost associated with forgoing discounts offered by trade creditors can be costly. Of course, this result depends on the bank overdraft rate, the invoice's credit terms and when the invoice is finally paid. To demonstrate how delaying invoice payment can reduce the cost of credit below the cost of an overdraft, determine the minimum number of days after the net period that one would delay payment on a 2/10 n30 invoice to get the cost of credit below 9.00% p.a. (a) 56 days (b) 66 days (c) 86 days (d) 96 days (e) 106 days
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To calculate the annualized percentage cost of credit we can use the following formula Annualized Pe...Get Instant Access to Expert-Tailored Solutions
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