National Co
Subject:AccountingPrice:9.82 Bought3
National Co.'s business is booming, and it needs to raise more capital. The company purchases supplies from a single supplier on terms of 1/10, net 20 days, and it currently takes the discount. One way of getting the needed funds would be to forgo the discount, and National's owner believes she could delay payment to 30 days without adverse effects. What is the effective annual rate of stretching the accounts payable? *[. Format: 11.11%
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Solution
=18.25%
Step-by-step explanation
Re=D/(a-b)*365 days in a year
Where;
Re −effective annual percentage; =?
D - % discount=1%
a - discount period (days); =30
b - duration of deferred payment (days)=10
Re={1%/(30-10) }*365 days
=18.25%
