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Accounting and annual rates of return

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Answer the following questions assuming a 360-day year. Calculate the approximate annual rate of return on investment of the following cash discount terms:

1/15, net 30
2/10, net 60
1/10, net 90

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Solution Summary

The solution depicts the steps by step methodology to calculate the approximate annual rate of return on investment of the given cash discount terms.

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Recall the following:
Annual rate of return = [Discount %/(100%-Discount %)]* [Number of days in a year/(Credit Period-Discount Period)]

a) 1/15, net 30
Discount = ...

Solution provided by:
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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