What is the effective annual cost of credit terms of 2/20, net 60, if the firm stretches the accounts payable to 80 days?
A) 6.4 %
B) 13.1%
C) 21.1%
D) 34.2%

Name: What is the effective annual cost of credit terms of 2/20, net 60, if the firm stretches the accounts payable to 80 days? A) 6.4 % B) 13.1% C) 21.1% D) 34.2%
Brand: Quizplus
Rating: 4.8 (44 reviews)

Question

Quizplus · Accepted Answer

B) 2 / 98 = 1.0204%; 80 days - 20 days = 60 days; Number of 60 days in a year = 365 / 60 = 6.083; Effective Annual cost = (1.0204)⁶^.083 - 1 = 13.1%

What Is the Effective Annual Cost of Credit Terms of 2/20