16-15 a. = 10 days = $10,000 10 = $100,000. b. There is no cost of trade credit at this point. The firm is using trade credit. “free” c. = 30 = $10,000 30 = $300,000. Nominal cost = (2/98)(365/20) = 37.24%, or $74,489.80/($300,000 $100,000) = 37.24%. – Effective cost = (1 + 2/98)365/20 1 = 0.4459 = 44.59%. – d. Nominal rate = Effective cost = (1 + 2/98)365/30 1 = 0.2786 = 27.86%. – 16-16 Trade Credit Terms: 2/10, net 30. But the firm plans delaying payments 35 additional days, which is the equivalent of 2/10, net 65. Nominal cost = = . Effective cost = (1 + 2/98)365/55 1 = 14.35%. –
16-15 a. = 10 days = $10,000 10 = $100,000. b. There is no cost of trade credit at this point. The firm is using “free” trade credit. c. = 30 = $10,000 30 = $300,000. Nominal cost = (2/98)(365/20) = 37.24%, or $74,489.80/($300,000 – $100,000) = 37.24%. Effective cost = (1 + 2/98)365/20 – 1 = 0.4459 = 44.59%. d. Nominal rate = Effective cost = (1 + 2/98)365/30 – 1 = 0.2786 = 27.86%. 16-16 Trade Credit Terms: 2/10, net 30. But the firm plans delaying payments 35 additional days, which is the equivalent of 2/10, net 65. Nominal cost = = . Effective cost = (1 + 2/98)365/55 – 1 = 14.35%.
FM14e_SM_Ch16.docx