A firm is offered trade credit terms of 3/15, net 30 days. The firm does not take the discount, and it pays after 50 days. (Assume a 365-day year.) A. The number of compounding period is _. B. How much is the rate per period? C. What is the annual nominal rate of not taking this discount?

A firm is offered trade credit terms of 3/15, net 30 days. The firm does not take the discount, and it pays after 50 days. (Assume a 365-day year.) A. The number of compounding period is _. B. How much is the rate per period? C. What is the annual nominal rate of not taking this discount?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter21: Supply Chains And Working Capital Management

Section: Chapter Questions

Problem 10MC

See similar textbooks

Related questions

Q: Friendly’s Quick Loans, Inc., offers you $8.50 today but you must repay $10.75 when you get your…

A: a.Calculate the effective annual rate.

Q: A firm is offered trade credit terms of 3/15, net 30 days. The firm does not take the discount, and…

A: Trade discount: it is a reduction granted by a supplier forms the list price of goods or services on…

Q: Friendly’s Quick Loans, Inc., offers you $4.25 today but you must repay $5.75 when you get your…

A: (i) To calculate annual return, first we need to calculate weekly return. Calculation of weekly rate…

Q: A firm is offered trade credit terms of 3/15, net 30 days. The firm does not take the discount, and…

A: Credit terms of 3/15, net of 30 days, Number of days to repay the loan is 50 days

Q: A firm offers terms of 5/14, net 50. What effective annual interest rate does the firm earn when a…

A: This term means seller will give 5% discount to the purchaser if he or she paid the outstanding…

Q: FP Co. buys on terms 2/10, net 30, but generally does not pay until the 40 days after invoice date.…

A: Given Information: Total purchases P2,160,000 Buying terms 2/10, net 30

Q: 7. Howes Inc. purchases $4,562,500 in goods per year from its sole supplier on terms of 2/15, net…

A: Financial Management: Financial management comprises of two words i.e. Finance and management.…

Q: A firm is offered trade credit terms of 3/15, net 30 days. The firm does not take the discount, and…

A: The effective annual cost of not taking trade cash discount is computed as follows: - Effective…

Q: Friendly's Quick Loans, Inc., offers you $8.25 today but you must repay $10.45 when you get your…

A: Given: Particulars Amount Present value $8.25 Future value $10.45

Q: GFB Co. buys on terms of 2/15, net 30 days. It does not take discounts, and it typically pays 30…

A: Free Trade credit refers to a type of financing wherein the buyer gets a credit period of…

Q: A firm is offered trade credit terms of 3/15, net 30 days. The firm does not take the discount, and…

A: The credit terms of 3/15, net of 30 days means if the firm will pay the credit amount within the 15…

Q: XYZ is evaluating whether to loosen its credit terms from 2/10, net 30 to 3/10, net 30. At present,…

Q: PPG Co. buys on terms of 2/15, net 30 days. It does not take discounts, and it typically pays 30…

A: Credit financing is a type of financing in which a purchase is made on credit, that is, the purchase…

Q: rate per period? The number of compounding period is ___ How many days are there per

A: Number of days per period are as follows:

Q: c. What is the effective annual rate of interest if Y pays on the due date rather than day 15? (Use…

A: Given, Invoice amount=$ 1,500 1/15, net 60, basis which means if company y pays within 15 days then…

Q: HBC Inc. buys on terms of 2/10, net 30 days. It does not take discounts, and it typically pays 30…

A: The question is related to the Free trade Credit. The details are given. First we will calculate…

Q: A supplier is offering your firm a cash discount of 2 percent if purchases are paid for within ten…

A: We will have to compute the effective rate of cash discount being offered by the supplier.

Q: A firm buys on terms of 3/15, net 45. It does not take the discount, and it generally pays after 60…

A: Discount rate = 0.03 (i.e. 3%) Payment days = 60 Discount days = 15 Nominal annual percentage cost…

Q: Why is some trade credit called free while other credit is called costly? If a firm buys on terms…

A: Trade Credit: The trade credit denotes to the credit sale. This credit be indebted money for the…

Q: Newsome Inc. buys on terms of 3/15, net 45. It does not take the discount, and it generally pays…

A: Nominal annual percentage cost=[Discount rate / (100-Discounting rate ) * [365 /(Total days to pay -…

Q: A firm is offered trade credit terms of 3/15, net 30 days. The firm does not take the discount, and…

A: solution given credit terms =3/15 net 30 days firm pays in 50 days the extra days taken =…

Q: A firm is offered trade credit terms of 3/15, net 30 days. The firm does not take the discount, and…

A: Note: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question…

Q: Newsome Inc. buys on terms of 4/10, net 45. It does not take the discount, and it generally pays…

A: Effective annual percentage = (1+[Discount rate/(1–Discount Rate)])^n– 1 Where n= No. of days in a…

Q: firm is offered trade credit terms of 3/15, net 45 days. The firm does not take the discount, and it…

A: Cost of not taking Trade Discount = Discount % / (100 - Discount%) × 365/(Total Pay period -…

Q: A supplier will give Shark Unibase Company a discount of 2% if an invoice is paid 60 days before its…

A: The credit policy of the supplier allows the company to avail a discount of 2% if the invoice is…

Q: A company is offred trade credit terms of 3/15, net 30 days. If the firm does not take the discount,…

A: The term 2/15, net 30 days means customer will get 3% discount if he pay within 15 days but here…

Q: A firm offers terms of 1/10, net 25. a. What effective annual interest rate does the firm earn when…

A: Given:

Q: If a firm buys under terms of 1/15, net 60, but actually pays on the 20th day and still takes the…

A: If a customer pays the amounts due on his purchase within a certain time period, he may receive a…

Q: A dealer quotes a customer 7.35% to borrow for one year with interest paid monthly. The customer…

A: Here, The Interest Rate is 7.35% Compounding Period is Monthly Customer preference Compounding…

Q: Newsome inc. buys on terms of 3/15, net 45. It does not take the discount, and it generally pays…

A: Financial Management: Financial management comprises of two words i.e. Finance and management.…

Q: A firm is offered trade credit terms of 3/15, net 30 days. The firm does not take the discount, and…

A: SOLUTION- WORKING- NUMBER OF DAYS ARE THERE PER PERIOD IS 50-15 = 35 DAYS.

Q: A firm is offered trade credit terms of 3/15, net 30 days. The firm does not take the discount, and…

A: The cost of trade credit: The cost of trade credit is actually an opportunity cost that occurs when…

Q: what is the annual interest rate cost (Use 360-day year)?

A: If the firm foregoes the cash discount offered then they would be paying higher for the goods. This…

Q: BayFish Company currently uses maximum trade credit by not taking discounts on its purchases.…

A: If the firm plans to use trade discount. Then firm should borrow notes. $10000 per day borrow. And…

Q: Friendly's Quick Loans, Inc., offers you $4.25 today but you must repay $5.75 when you get your…

A: Effective Annual Rate: The effective annual rate of interest is the interest rate actually earned on…

Q: Howes Inc. purchases $4,562,500 in goods per year from its sole supplier on terms of 2/15, net 50.…

A: Financial Management: Financial management comprises of two words i.e. Finance and management.…

Q: HBC Inc. buys on terms of 2/10, net 30 days. It does not take discounts, and it typically pays 30…

A: Trade Discount: Providing a trade discount is a good approach to capture a customer's attention by…

Q: Calla Lily Corp. purchases on terms of 2/8, net 45 days, does not accept discounts, and pays after…

A: Time = 45 days Terms = 2/8 Pay after A = 58 days Year y = 365 days

Q: ILTIS UI 1730, net 70, and decides to forgo the trade credit discount and pay on the net day, what…

A: The question is based on the concept of business accounting.

Q: Black Panther Inc. buys on terms of 2/15, net 60 days. It does not take discounts, and it typically…

A: Credit terms indicate the percentage discount a firm can take off the invoice amount if payments…

Q: .A firm is offered trade credit terms of 3/15, net 30 days. The firm does not take the discount, and…

A: solution given credit terms =3/15 net 30 days firm pays in 50 days the extra days taken =…

Q: Handley Bank advertises that its standard lending rate is 12% per annum compounding quarterly. Which…

A: The effective annual rate of interest is the actual or the real rate of interest paid or received…

Question

A firm is offered trade credit terms of 3/15, net 30 days. The firm does not take the discount, and it pays after 50 days. (Assume a 365-day year.)

A. The number of compounding period is _.

B. How much is the rate per period?

C. What is the annual nominal rate of not taking this discount?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1 Explanation

VIEW

Step 2 Answer

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

A customer takes out a loan of $130,000 on January 1, with a maturity date of 36 months, and an annual interest rate of 11%. If 6 months have passed since note establishment, what would be the recorded interest figure at that time? A. $7,150 B. $65,000 C. $14,300 D. $2,383
Suppose a firm makes purchases of $3.65 million per year under terms of 2/10, net 30, and takes discounts. What is the average amount of accounts payable net of discounts? (Assume the $3.65 million of purchases is net of discounts—that is, gross purchases are $3,724,489.80, discounts are $74,489.80, and net purchases are $3.65 million.) Is there a cost of the trade credit the firm uses? If the firm did not take discounts but did pay on the due date, what would be its average payables and the cost of this nonfree trade credit? What would be the firm’s cost of not taking discounts if it could stretch its payments to 40 days?
A firm is offered trade credit terms of 3/15, net 30 days. The firm does not take the discount, and it pays after 50 days. (Assume a 365-day year.) A. The number of compounding period is ___. B. How much is the rate per period? C. How many days are there per period? D. What is the annual nominal rate of not taking this discount?
A firm is offered trade credit terms of 3/15, net 30 days. The firm does not take the discount, and it pays after 50 days. (Assume a 365-day year) a. What is the effective annual cost of not taking this discount? b. How many days are there per period? c. How much is the rate per period? d. The number of compounding period is_? e. What is the annual nominal rate of not taking this discount?
A firm is offered trade credit terms of 3/15, net 30 days. The firm does not take the discount, and it pays after 50 days. Questions: - What is the annual nominal rate of not taking this discount? - How much is the rate per period?
A firm is offered trade credit terms of 3/15, net 30 days. The firm does not take the discount, and it pays after 50 days. (Assume a 365-day year.) Questions: - What is the annual nominal rate of not taking this discount? - How much is the rate per period?
A firm is offered trade credit terms of 3/15, net 30 days. The firm does not take the discount, and it pays after 50 days. (Assume a 365-day year.) How much is the rate per period? The number of compounding period is ___ How many days are there per period
A firm is offered trade credit terms of 3/15, net 30 days. The firm does not take the discount, and it pays after 50 days. What is the effective annual cost of not taking this discount? (Assume a 365-day year.)
A firm is offered trade credit terms of 3/15, net 30 days. The firm does not take the discount, and it pays after 50 days. (Assume a 365-day year.) 1. What is the annual nominal rate of not taking this discount? * 2. The number of compounding period is ___. *
A firm is offered trade credit terms of 3/15, net 45 days. The firm does not take the discount, and it pays after 67 days. What is the nominal annual cost of not taking the discount?
If a firm buys under terms of 1/15, net 40, but actually pays on the 20th day and still takes the discount, what is the nominal cost of its nonfree trade credit? Assume a 365-day year. Do not round intermediate calculations. Round your answer to two decimal places.
f a firm buys under terms of 3/15, net 50, but actually pays on the 20th day and still takes the discount, what is the nominal cost of its nonfree trade credit? Assume a 365-day year. Do not round intermediate calculations. Round your answer to two decimal places. % Does it receive more or less credit than it would if it paid within 15 days? I. Paying after the discount period, but still taking the discount gives the firm less credit than it would receive if it paid within 15 days. II. Paying before the discount period and taking the discount gives the firm more credit than it would receive if it paid within 15 days. III. Paying after the discount period, but still taking the discount gives the firm more credit than it would receive if it paid within 15 days.