The Thompson Corporation projects an increase in sales from $1.5 millionto $2 million, but it needs an additional $300,000 of current assets to support this expansion. Thompson can finance the expansion by no longertaking discounts, thus increasing accounts payable. Thompson purchasesunder terms of 2/10, net 30, but it can delay payment for an additional35 days—paying in 65 days and thus becoming 35 days past due—withouta penalty because its suppliers currently have excess capacity. What is theeffective, or equivalent, annual cost of the trade credit?

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