What is the effective cost of credit terms of 2/10, net 30 if the firm stretches the accounts payable to 45 days?
A) 49.76%
B) 36.12%
C) 23.45%
D) 44.59%

Name: What is the effective cost of credit terms of 2/10, net 30 if the firm stretches the accounts payable to 45 days? A) 49.76% B) 36.12% C) 23.45% D) 44.59%
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Question

Quizplus · Accepted Answer

C) 2 / 98 = 1.0204%; 45 days - 10 days = 35 days; Number of 35 days in a year = 365 days / 35 days = 10.4285; Effective Annual cost = (1.0204)^10.4285 - 1 = 23.45%

What Is the Effective Cost of Credit Terms of 2/10