Pag Inc. is a clothing retailer and it has terms from one of its vendors of 1/10, n/30. Compute theequivalent annual rate of return that Pag earns by always paying its bills within the discount period.

Pag Inc. is a clothing retailer and it has terms from one of its vendors of 1/10, n/30. Compute theequivalent annual rate of return that Pag earns by always paying its bills within the discount period.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 14P

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Question

Pag Inc. is a clothing retailer and it has terms from one of its vendors of 1/10, n/30. Compute the
equivalent annual rate of return that Pag earns by always paying its bills within the discount period.

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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