What is the effective annual cost of credit terms of 1/10 net 30, if the firm stretches the accounts payable to 45 days?
A) 8.49 %
B) 10.91%
C) 11.05%
D) 18.03%

Name: What is the effective annual cost of credit terms of 1/10 net 30, if the firm stretches the accounts payable to 45 days? A) 8.49 % B) 10.91% C) 11.05% D) 18.03%
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Quizplus · Accepted Answer

C) 1 / 99 = 1.01%; 45 days - 10 days = 35 days; No. of 35 days in a year = 365 / 35 = 10.4286; Effective Annual cost = (1.01)^10.4286 - 1 = 11.05%

What Is the Effective Annual Cost of Credit Terms of 1/10