A supplier offers you credit terms of 2/10,net 45.What is the cost of forgoing the discount on a purchase of $318,600? Assume a 365-day year.

Name: A supplier offers you credit terms of 2/10,net 45.What is the cost of forgoing the discount on a purchase of $318,600? Assume a 365-day year.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

Discount = 0.02 × $318,600 = $6,372 Loan amount = $318,600 − $6,372 = $312,228 Loan term = 45 − 10 = 35 days EAR = [1 + ($6,372 / $312,228)]³⁶⁵^/35 − 1 = 0.2345,or 23.45%

A Supplier Offers You Credit Terms of 2/10,net 45