If your hotel receives an invoice on terms of 2/10 net 30, what is the effective annual rate of return earned if the discount offered is taken?

Question

Quizplus · Accepted Answer

The terms 2/10 net 30 mean a 2% discount is available if paid within 10 days, otherwise, the full amount is due in 30 days. The effective annual rate of return is calculated as [(1 + 0.02/0.98)^(365/20) - 1], which equals approximately 37.24%.

If Your Hotel Receives an Invoice on Terms of 2/10