Tangshan Mining was extended credit terms of 34/105 net 30 EOM.The cost of giving up the cash discount, assuming payment would be made on the last day of the credit period, is closest towould be ________.If the firm were able to stretch its accounts payable to 60 days without damaging its credit rating, the cost of giving up the cash discount would only be ________.

Question

Quizplus · Accepted Answer

The cost of giving up the cash discount is calculated using the formula: [(Discount % / (1 - Discount %)) * (360 / (Full allowed payment days - Discount days))]. For 34/105 net 30 EOM, the cost is approximately 73.26%. If the payment period is extended to 60 days, the cost becomes approximately 25.09%.

Tangshan Mining Was Extended Credit Terms of 34/105 Net 30