Question

A firm buys on terms of 2/10, net 20. It does not take the discount, and it generally pays after 80 days. What is the nominal annual percentage cost of its non-free trade credit, based on a 365-day year

Answer 1

The nominal annual percentage cost of non-free trade credit can be calculated as:

(20/80) * (365/365) = 42.16%

Therefore, the nominal annual percentage cost of the firm's non-free trade credit is approximately 42.16% based on a 365-day year.