Calculate the annualized cost of the trade credit terms of 1/15, net 30 when payment is...

Question

Question

Calculate the annualized cost of the trade credit terms of 1/15, net 30 when payment is made on the net due date (assume a 365-day year).

Answer 1

Answer #1

Answer:

Trade credit terms of 1/15, net 30

Annualized cost of the trade credit = (Discount %)/(1 - Discount%)× 365/(Allowed payment days - Discount Period)

= 1%/ (1 - 1%) * 365 / (30 - 15)

= 24.58%

Annualized cost of the trade credit = 24.58%

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Answer 2

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