Question

Mavericks Cosmetics buys $4,347,116 of product (net of discounts) on terms of 8/10, net 60, and it currently pays on the 10th day and takes discounts. Mavericks plans to expand, and this will require additional financing. If Mavericks decides to forego discounts, what would the effective percentage cost of its trade credit be, based on a 365-day year

Answer 1

Answer:

15.59%

Explanation:

Calculation to determine what would the effective percentage cost of its trade credit be

Effective percentage cost=1+(.08/1-.08)]^(365/10)-1

Effective percentage cost=1.08^36.5-1

Effective percentage cost=15.59%

Therefore the effective percentage cost of its trade credit be 15.59%