Foundations Of Finance
10th Edition
ISBN: 9780134897264
Author: KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher: Pearson,
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Textbook Question
Chapter 15, Problem 10SP
(Annual percentage yield) Compute the cost of the trade credit terms in Problem 15-3 using the compounding formula, or effective annual rate.
(Cost of trade credit) Calculate the effective cost of the following trade credit terms when payment is made on the net due date:
- a. 2/10, net 30
- b. 3/15, net 30
- c. 3/15, net 45
- d. 2/15, net 60
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The approximate effective cost (EC) of financing the discount price of trade credit under terms 2/10, net/30 using a 360 day year is?
Cost of Trade Credit
Calculate the nominal annual cost of trade credit under each of the following terms. Assume a 365-day year. Do not round intermediate calculations.
Round your answers to two decimal places.
a. 1/15, net 25.
%
b. 2/10, net 60.
%
c. 3/10, net 50.
%
d. 2/10, net 50.
%
e. 2/15, net 40.
%
Cost of Trade Credit
Calculate the nominal annual cost of trade credit under each of the following terms. Assume a 365-day year. Do not round intermediate calculations. Round your answers to two decimal places.
1/15, net 20.
%
2/10, net 60.
%
3/10, net 50.
%
2/10, net 50.
%
2/15, net 40.
%
Chapter 15 Solutions
Foundations Of Finance
Ch. 15 - Dell Computer Corporation (DELL) has long been...Ch. 15 - Prob. 2RQCh. 15 - Prob. 3RQCh. 15 - Prob. 4RQCh. 15 - Explain what is meant by the statement The use of...Ch. 15 - Prob. 6RQCh. 15 - Prob. 7RQCh. 15 - How can the formula interest = principle rate ...Ch. 15 - How can we accommodate the effects of compounding...Ch. 15 - Prob. 10RQ
Ch. 15 - Prob. 11RQCh. 15 - Prob. 12RQCh. 15 - Prob. 1SPCh. 15 - Prob. 2SPCh. 15 - Prob. 3SPCh. 15 - (Estimating the cost of bank credit) Paymaster...Ch. 15 - (Cost of short-term financing) The R. Morin...Ch. 15 - (Cost of secured short-term credit) The Marlow...Ch. 15 - (Cost of short-term financing) You plan to borrow...Ch. 15 - Prob. 8SPCh. 15 - (Cost of trade credit) Calculate the effective...Ch. 15 - (Annual percentage yield) Compute the cost of the...Ch. 15 - Prob. 11SPCh. 15 - (Cost of accounts receivable) The Michelin...Ch. 15 - (Cost of accounts receivable) The Michelin...Ch. 15 - (Cost of factoring) MDM, Inc. is considering...Ch. 15 - (Cost of factoring) A factor has agreed to lend...Ch. 15 - Prob. 16SPCh. 15 - Prob. 17SP
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Calculate the nominal annual cost of nonfree trade credit under each of the following terms. Assume that payment is made either on the discount date or on the due date. a. 1/15, net 20 b. 2/10, net 60 c. 3/10, net 45 d. 2/10, net 45 e. 2/15, net 40arrow_forwardCalculate the nominal annual cost of no free trade credit under each of the following terms. Assume that payment is made either on the discount date or on the due date. a. 1/15, net 20 b. 2/10, net 60 c. 3/10, net 45 d. 2/10, net 45 e. 2/15, net 40arrow_forwardCost of Trade Credit What are the nominal and effective costs of trade credit under the credit terms of 4/10, net 30? Assume a 365-day year. Do not round intermediate calculations. Round your answers to two decimal places. Nominal cost of trade credit: % Effective cost of trade credit: %arrow_forward
- 13. Trade credit terms of 2/10, net 90 are available. Calculate the cost of trade credit when payment is made on the net due date using the APR. Use a 360 day year.arrow_forward14. Trade credit terms of 2/10, net 90 are available. Calculate the cost of trade credit when payment is made on the net due date using the EAR (also known as APY). Use a 360 day year.arrow_forwardCalculate the nominal annual cost of trade credit under each of the following terms. Assume a 365-day year. Do not round intermediate calculations. Round your answers to two decimal places. 1/15, net 25. % 2/10, net 60. % 3/10, net 55. % 2/10, net 55. % 2/15, net 45.arrow_forward
- On a 365-day basis, what is the rate per period of using trade credit if terms are 2/10, net 30, and payment is made on the twentieth day? * 104% 2.04% 109% 10% 1.09% On a 365-day basis, what is the effective annual rate of using trade credit if terms are 2/10, net 30, and payment is made on the twentieth day? * 1.09% 2.04% 109% 10% 104%arrow_forwardOn a 365-day basis, what is the effective annual rate of using trade credit if terms are 2/10, net 30, and payment is made on the twentieth day? * a.104% b.109% c.10% d.2.04% e.1.09%arrow_forward(Related to Checkpoint 18.2) (Evaluating trade credit discounts) If a firm buys on trade credit terms of 5/15, net 90 and decides to forgo the trade credit discount and pay on the net day, what is the annualized cost of forgoing the discount (assume a 365-day year)? The annualized cost of the trade credit terms of 5/15, net 90 is %. (Round to two decimal places.)arrow_forward
- Explain the meaning of a 20% annual percentage rate (APR) quotedby the credit c.ird company? And how the credit card company calculates theinterest payment?arrow_forwardRequired: a. A firm currently offers terms of sale of 3/25, net 50. Calculate the effective annual rate. a-1. Calculate the effective annual rate if the terms are changed to 4/25, net 50. a-2. What effect does an increase in the discount rate have on the implicit interest rate charged to customers that pass up the discount? b-1. Calculate the effective annual rate if the terms are changed to 3/35, net 50. b-2. What effect does a decrease in the extra days of credit have on the implicit interest rate charged to customers that pass up the discount? c-1. Calculate the effective annual rate if the terms are changed to 3/25, net 40. c-2. Is there any difference between the implicit interest rate for terms of 3/35, net 50 and 3/25, net 40?arrow_forwardWhat is the effective annual cost of credit terms of 3/15 net 30, if the firm stretches. the accounts payable to 60 days? A) 28.03% B) 1.7% OC) 12.65% OD) 3.35%arrow_forward
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