Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN: 9781337395083
Author: Eugene F. Brigham, Phillip R. Daves
Publisher: Cengage Learning
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The cost per period of the trade credit extended to Free Spirit, rounded to two decimal places, is (4.00%, 4.17%, 3.67%, 3.50%)
Free Spirit’s trade credit has a nominal annual cost of , assuming a 365-day year. (Note: Round all intermediate calculations to four decimal places, and your final answer to two decimal places.) (28.07%, 33.82%, 33.14%, 30.44%)
The effective annual rate (EAR) of the supplier’s trade credit is (35.36%, 39.29%, 32.61%, 36.93%)
If Free Spirit Industries Inc.’s supplier shortens its discount period to five days, this will the cost of the trade credit. (increase, decrease)
Transcribed Image Text:Firms usually offer their customers some form of trade credit. This allowance comes with certain terms of credit, which affect the cost of asset of sale
for the buyer as well as the seller.
Consider this case:
Free Spirit Industries Inc. buys most of its raw materials from a single supplier. This supplier sells to Free Spirit on terms of 4/15, net
60.
The cost per period of the trade credit extended to Free Spirit, rounded to two decimal places, is
Free Spirit's trade credit has a nominal annual cost of
decimal places, and your final answer to two decimal places.)
The effective annual rate (EAR) of the supplier's trade credit is
assuming a 365-day year. (Note: Round all intermediate calculations to four
If Free Spirit Industries Inc.'s supplier shortens its discount period to five days, this will
the cost of the trade credit.
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