Nominal annual cost of trade credit
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Your company has been offered credit terms on its purchases of 4/30, net 90 days. What will be the nominal annual cost of trade credit if your company pays on the 35th day after receiving the invoice? (Asuume a 365-day year.)
a. 30%
b 304%
c. 3%
d. 87%
e. 156%
Can anyone help me solve this question. Would I apply the formula:
Knom=Discount %/(1-Discount %) * 365/(Days taken - Discount period).
If so how do I find the discount percent and discount period?
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The solution explains how to calculate the nominal annual cost of trade credit
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The formula is correct.
The terms 4/30 net 90 imply that the discount is 4%, discount period ...
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