Bumpas Enterprises purchases $4,562,500 in goods per year from its sole supplier

Question

Bumpas Enterprises purchases $4,562,500 in goods per year from its sole supplier on terms of 2/15, net 50. If the firm chooses to pay on time but does not take the discount, what is the effective annual percentage cost of its non-free trade credit? (Assume a 365-day year.) Answer 20.11% 21.17% 22.28% 23.45% 24.63% Bumpas Enterprises purchases $4,562,500 in goods per year from its sole supplier on terms of 2/15, net 50. If the firm chooses to pay on time but does not take the discount, what is the effective annual percentage cost of its non-free trade credit? (Assume a 365-day year.) Bumpas Enterprises purchases $4,562,500 in goods per year from its sole supplier on terms of 2/15, net 50. If the firm chooses to pay on time but does not take the discount, what is the effective annual percentage cost of its non-free trade credit? (Assume a 365-day year.) 20.11% 21.17% 22.28% 23.45% 24.63% 20.11% 21.17% 22.28% 23.45% 24.63%

Explanation / Answer

Hi,

Please find the answer as follows:

Effective Annual Rate = (1+2/(100-2))^365/35 = 1.2345 - 1 = .2345 or 23.45%

Answer is 23.45%

Thanks.

Related Questions

Navigate

• Browse (All)
• Browse B
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.