A Firm Buys on Terms of 3/15,net 45 Days

question 38

Multiple Choice

A firm buys on terms of 3/15,net 45 days.It does not take the discount,and it generally pays after 65 days.What is the nominal annual cost of its non-free trade credit,based on a 365-day year?

• A)22.58%
• B)23.71%
• C)24.89%
• D)26.14%

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Definitions:

Cash

A form of currency that includes coins and paper bills.

Capital

The wealth in the form of money or other assets owned by a person or organization or available for purposes such as starting a company or investing.

Fair Value

Fair Value is the estimated market value of an asset or liability, reflecting the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

Equipment

Tangible property that is used in the operations of a business, not intended for sale.