A Firm Is Offered Trade Credit Terms of 2/8, Net

question 114

Multiple Choice

A firm is offered trade credit terms of 2/8, net 45 days. The firm does not take the discount, and it pays after 58 days. What is the effective annual cost of not taking this discount? (Assume a 365-day year.)

• A) 21.63%
• B) 13.35%
• C) 14.90%
• D) 15.89%
• E) 18.70%

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Definitions:

Iron

A chemical element with symbol Fe and atomic number 26, known for its high strength and magnetic properties.

Limiting Reactant

The reactant in a chemical reaction that limits the amount of product that can be formed because it is used up first.

Theoretical Yield

The maximum amount of product that can be generated from a given amount of reactants in a chemical reaction, under ideal conditions.

Limiting Reactant

The reactant in a chemical reaction that limits the amount of product that can be formed; the reaction stops when all of this reactant is consumed.