The Thompson Corporation projects an increase in sales from $1.5 million to $2 million, but it needs and additional $300,00 of current assets to support this expansion. Thompson can finance the expansion by no longer taking discounts, thus increasing accounts payable. Thompson purchases under terms of 2/10, net 30, but can delay payment for an additional 35 days-paying in 65 days and thus becoming 35 days past due-without a penalty because its suppliers currently have excess capacity. What is the effective, or equivalent, annual cost of the trade credit?© BrainMass Inc. brainmass.com September 22, 2018, 10:49 pm ad1c9bdddf - https://brainmass.com/business/accounts-receivable-management/effective-annual-cost-of-the-trade-credit-347436
Effective cost of trade credit = (1+ periodic interest ...
The solution explains how to calculate the effective annual cost of the trade credit