Solved

A Firm Currently Offers Terms of Sale of 3/20, Net

Question 117

Essay

A firm currently offers terms of sale of 3/20, net 40. What effect will the following actions have on the implicit interest rate charged to customers that pass up the cash discount? State whether the implicit interest rate will increase or decrease.
a. The terms are changed to 4/20, net 40.
b. The terms are changed to 3/30, net 40.

Correct Answer:

verifed

Verified

Current EAR = [1 + (0.03/(1 - 0.03))]365/(40 - 20) - ...

View Answer

Unlock this answer now
Get Access to more Verified Answers free of charge

Related Questions

Unlock this Answer For Free Now!

View this answer and more for free by performing one of the following actions

qr-code

Scan the QR code to install the App and get 2 free unlocks

upload documents

Unlock quizzes for free by uploading documents