Bumpas Enterprises purchases $4,562,500 in goods per year from its sole supplier on terms of 5/10, net 105. If the firm chooses to pay on time but does nottake the discount, what is the effective annual percentage cost of its non-free trade credit? (Assume a 365-day year.)a. 21.35%b. 21.78%c. 17.68%d. 20.22%e. 19.57%

Trade credit is a type of credit that is extended by a business to its customers. It allows…

Bumpas Enterprises purchases $4,562,500 in goods per year from its sole supplier on terms of 5/10, net 105. If the firm choo ake the discount, what is the effective annual percentage cost of its non-free trade credit? (Assume a 365-day year.) O a. 21.35% O b. 21.78% O c. 17.68% O d. 20.22%

Bumpas Enterprises purchases $4,562,500 in goods per year from its sole supplier on terms of 5/10, net 105. If the firm choo ake the discount, what is the effective annual percentage cost of its non-free trade credit? (Assume a 365-day year.) O a. 21.35% O b. 21.78% O c. 17.68% O d. 20.22%

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter21: Supply Chains And Working Capital Management

Section: Chapter Questions

Problem 15P: Suppose a firm makes purchases of $3.65 million per year under terms of 2/10, net 30, and takes...

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Trade Credit

Answer- a- Before Shipping of goods

Question

Bumpas Enterprises purchases $4,562,500 in goods per year from its sole supplier on terms of 5/10, net 105. 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.)
a. 21.35%
b. 21.78%
c. 17.68%
d. 20.22%
e. 19.57%

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