Book Depot Inc. sells on terms of 3/20, net 45. What is theimplicit cost of...

Book Depot Inc. sells on terms of 3/20, net 45. What is the implicit cost of trade credit under these terms? Use a 365-day year.

Round the answer to two decimal places in percentage form. (Write the percentage sign in the "units" box)

Expert Solution

- Selling term is 3/20, net 45 which means that 3% discount will be given if Credit is paid within 20 days of the Invoice date and without discount credit has to be paid within 45 days.

Formula for :-

Implicit cost of trade credit

wheree, Discount = 3%

D = Extra Credit days = Normal term days - Discount term = 45 -20 = 25

Implicit cost of trade credit

Implicit cost of trade credit = 1.560029 - 1

Implicit cost of trade credit = 56.00%

jeff jeffy answered 2 years ago

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