Andrews Corporation Buys on Terms of 2/8, Net 45 Days

question 72

Multiple Choice

Andrews Corporation buys on terms of 2/8, net 45 days, it does not take discounts, and it actually pays after 58 days.What is the effective annual percentage cost of its non-free trade credit? (Use a 365-day year.)

• A) 14.34%
• B) 15.10%
• C) 15.89%
• D) 16.69%
• E) 17.52%

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Definitions:

Price Subsidy

A financial assistance given by the government to lower the price of a product or service to encourage its consumption or production.

Quantity Control

Regulatory measures or policies aimed at limiting the amount of goods produced, supplied, or available in a market.

Lower Limit

The smallest value that a given set, statistical sample, or data category can take on or be assigned.

Upper Limit

The maximum level or value that can be reached or is allowable in a given context.