. Firms that fail to take advantage of this early payment discount are giving up approximately 36%.

Question

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The statement refers to the annualized cost of not taking a discount for early payment. If a firm does not take a 2% discount for paying within 10 days instead of the usual 30 days, it effectively pays an annualized interest rate of approximately 36% (calculated as 2% for 20 days, extrapolated to a year).

Firms That Fail to Take Advantage of This Early