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Cost of Trade Credit

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A company has been offered credit terms on its purchases of 4/30, net 90. What will be the approx. cost of trade credit if the company pays on the 35th day after receiving the invoice

30%
300%
3%
87%
156%

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Solution Summary

The solution explains how to calculate the cost of trade credit it the discount is not taken

Solution Preview

The terms are 4% discount is paid in 30 days, else you have to pay in 90 days. In this case the firm pays on 35th day. Thus by paying after 5 days it is loosing 4% discount. The ...

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