Question

​(Related to Checkpoint​ 18.3) ​(Evaluating trade credit​ discounts) Determine the annualized cost of forgoing the trade credit discount on the terms of 3​/15​, net 60 ​(assume a​ 360-day year).

Answer 1

Answer: Annualized cost of forgoing Discount = 24.74%

Step-by-step explanation:

D=discount rate = 3%

N1=umber of days to claim discount = 15

N= Normal days = 60

Annualized cost of forgoing Discount = (D÷(100 -D)) x (360÷(N - N1))

Annualized cost of forgoing Discount = (3%÷(100% - 3%)) x (360÷(60-15)

Annualized cost of forgoing Discount = (3%÷97%) x (360÷45)=0.247422680

Annualized cost of forgoing Discount = 24.74%