The annual cost of trade credit assuming a 365-day year for terms 3/10 net 40 is
closest to:
A. 43.3%
B. 44.9%.
C. 32.0%
D. 27.8%
b. 44.9%
Cost of trade credit = [1 + (Disc.%/100 - Disc.%)]^[365 / (Days Credit Outstanding – Discount Period)] - 1
Cost of trade credit = [1 + (3/97)]^[365 / (40 - 10)] - 1
Cost of trade credit = 0.449 or 44.9%
The annual cost of trade credit assuming a 365-day year for terms 3/10 net 40 is...
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