Newsome Inc.buys on terms of 3/15, net 45.It does not take the discount, and it generally pays after 60 days.What is the nominal annual percentage cost of its non-free trade credit, based on a 365-day year?
A) 25.09%
B) 27.59%
C) 30.35%
D) 33.39%
E) 36.73%

Question

Quizplus · Accepted Answer

The nominal annual percentage cost of non-free trade credit is calculated as follows:Nominal Annual Percentage Cost = (Discount Percentage / (1 - Discount Percentage)) * (365 / Net Period - Discount Period)= (3% / (1 - 3%)) * (365 / 45 - 15)= (3% / 0.97) * (365 / 30)= 0.0309 * 12.17= 0.377 or 37.7%