Many sellers offer a 2% discount to a buyer that makes payment 20 days before the due date, (2/10,net 30).Firms that fail to take advantage of this early payment discount are losing approximately 36%.

Question

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The annualized cost of not taking a 2% discount for paying 20 days early is approximately 36%, calculated using the formula: (Discount % / (1 - Discount %)) * (360 / (Full Payment Due Days - Discount Days)).

Many Sellers Offer a 2% Discount to a Buyer That