Question
In: Finance
A large retailer obtains merchandise under the credit terms of 1/10, net 35, but routinely takes...
A large retailer obtains merchandise under the credit terms of 1/10, net 35, but routinely takes 55 days to pay its bills. (Because the retailer is an important customer, suppliers allow the firm to stretch its credit terms.) What is the retailer's effective cost of trade credit? Assume a 365-day year. Do not round intermediate calculations. Round your answer to two decimal places.
Solutions
Expert Solution
Effective Cost of Trade Credit = [1 + (Disc.%/100 - Disc.%)]^[365 / (Days Credit Outstanding – Discount Period)] - 1
Effective Cost of Trade Credit = [1 + (1/99)]^[365 / (55 - 10)] - 1
Effective Cost of Trade Credit = 0.0849 or 8.49%
jeff jeffy answered 2 years agoRelated Solutions
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cost of trade credit? Assume 365 days in year for your
calculations. Do not round intermediate calculations. Round your
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A large retailer obtains merchandise under the credit terms of 1/15, net 40, but routinely takes...
A large retailer obtains merchandise under the credit terms of
1/15, net 40, but routinely takes 55 days to pay its bills.
(Because the retailer is an important customer, suppliers allow the
firm to stretch its credit terms.) What is the retailer's effective
cost of trade credit? Assume 365 days in year for your
calculations. Do not round intermediate calculations. Round your
answer to two decimal places.
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A large retailer obtains merchandise under the credit terms of
3/20, net 45, but routinely takes 60 days to pay its bills.
(Because the retailer is an important customer, suppliers allow the
firm to stretch its credit terms.) What is the retailer's effective
cost of trade credit? Assume 365 days in year for your
calculations. Do not round intermediate calculations. Round your
answer to two decimal places.
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A large retailer obtains merchandise under the credit terms of
2/15, net 45, but routinely takes 55 days to pay its bills.
(Because the retailer is an important customer, suppliers allow the
firm to stretch its credit terms.) What is the retailer's effective
cost of trade credit? Assume 365 days in year for your
calculations. Do not round intermediate calculations. Round your
answer to two decimal places.
A large retailer obtains merchandise under the credit terms of 2/15, net 30, but routinely takes 60 days to pay its bills.
Cost of Trade
CreditA large retailer
obtains merchandise under the credit terms of 2/15, net 30, but
routinely takes 60 days to pay its bills. (Because the retailer is
an important customer, suppliers allow the firm to stretch its
credit terms.) What is the retailer's effective cost of trade
credit? Assume 365 days in year for your calculations. Do not round
intermediate calculations. Round your answer to two decimal
places.%
Problem 16-04 Cost of Trade Credit A large retailer obtains merchandise under the credit terms of...
Problem 16-04
Cost of Trade Credit
A large retailer obtains merchandise under the credit terms of
3/20, net 45, but routinely takes 50 days to pay its bills.
(Because the retailer is an important customer, suppliers allow the
firm to stretch its credit terms.) What is the retailer's effective
cost of trade credit? Assume 365 days in year for your
calculations. Do not round intermediate calculations. Round your
answer to two decimal places.
%?
Problem 16-04 Cost of Trade Credit A large retailer obtains merchandise under the credit terms of...
Problem 16-04
Cost of Trade Credit
A large retailer obtains merchandise under the credit terms of
2/15, net 45, but routinely takes 60 days to pay its bills.
(Because the retailer is an important customer, suppliers allow the
firm to stretch its credit terms.) What is the retailer's effective
cost of trade credit? Assume 365 days in year for your
calculations. Do not round intermediate calculations. Round your
answer to two decimal places.
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