The Delta Fish Hatchery factors its accounts receivables immediately at a 2 percent discount.The average collection period is 34 days.Assume that all accounts are collected in full.What is the effective annual interest rate on this arrangement?

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Interest rate for 34 days = 0.02/(1 - 0.02) = 0.020408163Number of periods per year = 365/34 = 10.735294Effective annual rate = 1. 020408163^10.735294 - 1 = 24.22 percent

The Delta Fish Hatchery Factors Its Accounts Receivables Immediately at a 2