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

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

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.

$2.19