Suppose a firm makes purchases of $3.3 million per year under terms of 1/10, net 30, and takes discounts. Assume 365 days in a year for your calculations. Do not round intermediate calculations.
What is the average amount of accounts payable net of discounts? (Assume that the $3.3 million of purchases is net of discounts - that is, gross purchases are $3,333,333, discounts are $33,333, and net purchases are $3.3 million.) Round your answer to the nearest dollar.
$
Is there a cost of the trade credit the firm uses?
-Select-IIIItem 2
I. There is no cost of trade credit at this point. The firm is using "free" trade credit.
II. The cost of the trade credit is $271,233.
If the firm did not take discounts but it did pay on the due date, what would be its average payables? Round your answer to the nearest dollar.
$
If the firm did not take discounts but it did pay on the due date, what would be its nominal cost? Round your answer to two decimal places.
%
If the firm did not take discounts but it did pay on the due date, what would be its effective cost? Round your answer to two decimal places.
%
What would the firm's cost of not taking discounts be if it could stretch its payments to 41 days? Round your answers to two decimal places.
Nominal cost %
Effective cost %