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Asked Nov 26, 2019
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Please show all equations and work as needed. If possible, please type the work so that it may be copied and pasted. Thank you.

7.
Assume the trade credit terms offered to your
firm by your suppliers are 3/5, Net 30. Calculate
the cost of the trade credit (effective annual
rate) from day 5 until day 30 when you paid.
25.37%
55.94%
21.61%
29.30%
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7. Assume the trade credit terms offered to your firm by your suppliers are 3/5, Net 30. Calculate the cost of the trade credit (effective annual rate) from day 5 until day 30 when you paid. 25.37% 55.94% 21.61% 29.30%

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Expert Answer

Step 1

The computation of cost of trade credit is as follows:

Here,3/5 net represents 3% discount is available if paid within 5 days...

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365 Discount 1+ 1-Discount Days after discount period-1 Cost of trade credit =

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