Question

4. Cost of trade credit Aa Aa Firms usually offer their customers some form of trade credit. This allowance comes with certain terms of credit, which will affect the actual cost of asset being sold for the buyer and the seller. Consider this case: Cold Duck Manufacturing Inc. buys most of its raw materials from a single supplier. This supplier sells to Cold Duck on terms of 2/15, net 60. The cost per period of the trade credit extended to Cold Duck, rounded to two decimal places, is Cold Duck's trade credit has a nominal annual cost of intermediate calculations to four decimal places, and your final answer to two decimal places.) , assuming a 365-day year. (Note: Round all If Cold Duck Manufacturing Inc.'s supplier shortens its discount period to five days, this will the trade credit. the cost of

Answer 1

1)	The cost per period of the trade credit extended to Cold Duck,
	rounded to two decimal places, is 2.04%
	[2/98 = 2.04]
2)	Cold Duck's………….cost of 16.55%, assuming a 365-day year.
3)	If Cold Duck Manufacturing Inc.'s …………………….five days, this
	will reduce the cost of trade credit. {14.90%]