Question

A supplier hands you an invoice for $48,000 with the terms 4/25, net 60. Part 1...

A supplier hands you an invoice for $48,000 with the terms 4/25, net 60.

Part 1

What is the implicit interest rate (not annualized) you are charged if you forgo the discount and pay as late as possible?

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Answer #1

[Discount rate / (100 - Discount rate)] * [60 days / (due date - early payment date)

[4 / (100 - 4)] * 60 / (60 - 25)

(4/96) * 60 /35

= 0.0714

= 7.14%

=

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