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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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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Darshita6.14K 0 Comments

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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