Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN: 9781337395083
Author: Eugene F. Brigham, Phillip R. Daves
Publisher: Cengage Learning
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Textbook Question
Chapter 21, Problem 7P
Calculate the nominal annual cost of nonfree trade credit under each of the following terms. Assume that payment is made either on the discount date or on the due date.
- a. 1/15, net 20
- b. 2/10, net 60
- c. 3/10, net 45
- d. 2/10, net 45
- e. 2/15, net 40
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Calculate the nominal annual cost of no free trade credit under each of the following
terms. Assume that payment is made either on the discount date or on the due date.
a. 1/15, net 20
b. 2/10, net 60
c. 3/10, net 45
d. 2/10, net 45
e. 2/15, net 40
If the annualized cost of the trade credit discount is 7.37%, what is the net trade credit period? Assume a discount percentage of 1% for payments received on or before 20 days.
Select one:
a.
20 days
b.
30 days
c.
50 days
d.
70 days
What are the nominal and effective costs of trade credit under the credit terms of 2/20, net 35? Assume a 365-day year. Do not round intermediate calculations. Round your answers to two decimal places.
Nominal cost of trade credit: %
Effective cost of trade credit: %
Chapter 21 Solutions
Intermediate Financial Management (MindTap Course List)
Ch. 21 - a. Working capital; net working capital; net...Ch. 21 - Prob. 2QCh. 21 - Is it true that, when one firm sells to another on...Ch. 21 - What are the four elements of a firm’s credit...Ch. 21 - Prob. 5QCh. 21 - Prob. 6QCh. 21 - Prob. 7QCh. 21 - Is it true that most firms are able to obtain some...Ch. 21 - What kinds of firms use commercial paper?Ch. 21 - Prob. 1P
Ch. 21 - Medwig Corporation has a DSO of 17 days. The...Ch. 21 - What are the nominal and effective costs of trade...Ch. 21 - A large retailer obtains merchandise under the...Ch. 21 - A chain of appliance stores, APP Corporation,...Ch. 21 - Prob. 6PCh. 21 - Calculate the nominal annual cost of nonfree trade...Ch. 21 - If a firm buys on terms of 3/15, net 45, but...Ch. 21 - Grunewald Industries sells on terms of 2/10, net...Ch. 21 - The D.J. Masson Corporation needs to raise...Ch. 21 - Negus Enterprises has an inventory conversion...Ch. 21 - Strickler Technology is considering changes in its...Ch. 21 - Payne Products had $1.6 million in sales revenues...Ch. 21 - Dorothy Koehl recently leased space in the...Ch. 21 - Suppose a firm makes purchases of $3.65 million...Ch. 21 - The Thompson Corporation projects an increase in...Ch. 21 - The Raattama Corporation had sales of $3.5 million...Ch. 21 - Karen Johnson, CFO for Raucous Roasters (RR), a...Ch. 21 - Prob. 2MCCh. 21 - Prob. 3MCCh. 21 - Prob. 4MCCh. 21 - Prob. 5MCCh. 21 - Prob. 6MCCh. 21 - Prob. 7MCCh. 21 - Prob. 8MCCh. 21 - What is the impact of higher levels of accruals,...Ch. 21 - Prob. 10MCCh. 21 - Prob. 11MCCh. 21 - Prob. 12MCCh. 21 - Prob. 13MCCh. 21 - Prob. 14MCCh. 21 - Prob. 15MCCh. 21 - Prob. 16MC
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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
- Captain Whitman Ship Supplies offers terms of 3/15, net 45. If a purchaser takes the discount and pays on the 10th day, what is the nominal cost of trade credit? Now suppose a purchaser actually pays on the 20th day but still takes the discount. What is the actual nominal cost of the trade credit?arrow_forwardThe approximate effective cost (EC) of financing the discount price of trade credit under terms 2/10, net/30 using a 360 day year is?arrow_forwardhat are the nominal and effective costs of trade credit under the credit terms of 2/20, net 40? Assume a 365-day year. Do not round intermediate calculations. Round your answers to two decimal places. Nominal cost of trade credit: % Effective cost of trade credit:arrow_forward
- Cost of Trade Credit What are the nominal and effective costs of trade credit under the credit terms of 4/10, net 30? Assume a 365-day year. Do not round intermediate calculations. Round your answers to two decimal places. Nominal cost of trade credit: % Effective cost of trade credit: %arrow_forwardCalculate the nominal annual cost of trade credit under each of the following terms. Assume a 365-day year. Do not round intermediate calculations. Round your answers to two decimal places. 1/15, net 25. % 2/10, net 60. % 3/10, net 55. % 2/10, net 55. % 2/15, net 45.arrow_forwardCost of Trade Credit Calculate the nominal annual cost of trade credit under each of the following terms. Assume a 365-day year. Do not round intermediate calculations. Round your answers to two decimal places. 1/15, net 30. % 2/10, net 50. % 3/10, net 55. % 2/10, net 55. % 2/15, net 45. %arrow_forward
- Explain the meaning of a 20% annual percentage rate (APR) quotedby the credit c.ird company? And how the credit card company calculates theinterest payment?arrow_forwardThe net price of an item after trade discounts of 34.00%, 13.00%, and 3.50% is $3,520.00. a. Calculate the regular selling price of the goods. $0.00 Round to the nearest cent b. Calculate the equivalent discount rate of the series of discount rates. 0.00 % Round to two decimal placesarrow_forwardn the credit account statement below, the values of the annual percentage rate (APR), finance charge, and the new balance must be calculated. PreviousBalance AnnualPercentageRate (APR) MonthlyPeriodicRate(as a %) FinanceCharge(in $) Purchasesand CashAdvances PaymentsandCredits NewBalance(in $) $1,026.61 1.75% $322.20 $300.00 Recall that the annual percentage rate (APR) is tied to the monthly periodic rate by the following formula. monthly periodic rate = APR 12 By solving this equation for the APR, the known value for the monthly periodic rate can be substituted to calculate the APR. APR = monthly periodic rate ✕ 12 The monthly periodic rate is given to be 1.75%. Find the APR. APR = 12 ✕ monthly periodic rate = 12 ✕ ____ % = ____%arrow_forward
- (Annual percentage yield) Compute the cost of the following trade credit terms using the compounding formula, or effective annual rate. Note: Assume a 30-day month and 360-day year. a. 3/5, net 30 b. 2/15, net 45 c. 3/15, net 60 d. 4/10, netarrow_forward(Trade Credit Discounts) Determine the effective annualized cost of forgoing the trade credit discount on the following terms: 1/10, net 20 2/10, net 30 Common Stock A Common Stock B Probability Return Probability Return .30 11% .20 25% .40 15% .30 6% .30 19% .30 14% .20 22%arrow_forward(Cost of Trade Credit) Calculate the effective cost of the following trade credit terms where payment is made on the net due date. 2/10, net 30 3/15, net 30 Common Stock A Common Stock B Probability Return Probability Return .30 11% .20 25% .40 15% .30 6% .30 19% .30 14% .20 22%arrow_forward
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