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    Financial Problem: Figuring the cost of foregoing the cash discount.

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    Syntech is offered credit terms of 2/10, net 40, but decides to forego taking the cash discount and pays on the 45th day. What is Syntech's cost of foregoing the cash discount? [AFC=(Interest Paid/usable funds)(365/maturity(days)]

    The four answers that I have are one of the following:

    a. 24.83%
    b. 21.28%
    c. 18.62%
    d. none of the above

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    Solution Preview

    If Syntech takes the cash discount, it can pay 2% less.
    Discount rate is d = 2%
    Maturity days = ...

    Solution Summary

    The cost of foregoing a cash discount is determined. The response received a rating of "5" from the student who posted the question.