Ohio Valley Homecare Suppliers, Inc

Subject:FinancePrice:2.86 Bought7

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Ohio Valley Homecare Suppliers, Inc. (OVHS), had $20 million in sales in 2009. Its cost of goods sold was $8 million, and its average inventory balance was $2,000,000.

A) OVHS purchases goods from its supplier on terms of 3/15, Net 40. What is the effective annual cost to the firm if it chooses not to take the discount and makes its payment on day 40?

B) What is the effective annual cost to the firm if it chooses not to take the discount and makes its payment on day 50?