Book Depot Inc. sells on terms of 1/20, net 80. What is the implicit cost of trade credit under these terms? Use a 365-day year. The answer is 6.14% but I do not know how to get to that in excel.
Book Depot Inc. sells on terms of 1/20, net 80. What
is the implicit cost of trade credit under these terms? Use a 365-day year. The answer is 6.14% but I do not know how to get to that in excel.
Formula for Implicit Costs of Trade Credit (APR) is
a/b, net c
a 365
APR = —————— X ——————
100 – a (c – b)
1 365
APR = ———— X —————— = 6.14%
100 – 1 (80 – 20)
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