Help solving – I do not have a financial calculator and don’t understand how to calculate the solution. Pets Store Inc. sells on terms of 1/15, net 90. What is the effective annual cost of trade credit under these terms?
Help solving – I do not have a financial calculator and don’t understand how to calculate the solution.
Pets Store Inc. sells on terms of 1/15, net 90. What is the effective annual cost of trade credit under these terms? Use a 365-day year.
Effective annual cost of trade credit a/b, net c
=[(1+(a/(100-a))^(365/(c-b))] – 1
=[(1+(1/(100-1))^(365/(90-15))] – 1 =5.01%
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