Dixie Tours Inc

question 30

Multiple Choice

Dixie Tours Inc.buys on terms of 2/15, net 30.It does not take discounts, and it typically pays 35 days after the invoice date.Net purchases amount to R720,000 per year.What is the approximate percentage cost of its non-free trade credit?

• A) 17.2%
• B) 23.6%
• C) 26.1%
• D) 36.7%
• E) 50.6%

---

Definitions:

Preferred Stock

A class of ownership in a corporation that has a higher claim on assets and earnings than common stock and typically dividends that are paid out before those to common stockholders.

Annual Dividend

The total amount of dividend payments a company makes to its shareholders over a single fiscal year.

Return

The income generated on an investment over a particular period of time, expressed as a percentage of the investment's initial cost.

Call Option

A financial contract giving the buyer the right, but not the obligation, to purchase a stock, bond, commodity, or other asset at a specified price within a specific time period.