Assume the credit terms offered to your firm by your suppliers are 3/5, Net 30. Calculate the cost of the trade credit if your firm does not take the discount and pays on day 30

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1.02K viewsJanuary 1, 2017

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Darshita 6.14K January 1, 2017 0 Comments

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score 0 · Answer 1 · 2017-01-01T08:33:02+00:00

Cost of Trade (EAR) = ( 1 + 3/97)^(365/25) – 1 = 56.00%

Interest rate per period = 3/97 = 3.09%

EAR = (1 + 3.09%)^(365/25) -1 = 55.94%)

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