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# Pet store Inc. sells on terms of 1/20, net 90. What is the effective annual cost of trade credit under these terms?

Pet store Inc. sells on terms of 1/20, net 90. What is the effective annual cost of trade credit under these terms? Use 365- day year. Round the answer to two decimal places in percentage form.

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1/20, net 90 Cost of trade credit =(1 + d /(1 – d)) (365 / (Normal days – Discount days)) – 1 d = Early payment discount percentage
Normal days = Normal credit terms offered
Discount days =...

1 comment
• refer my excel for best understanding and for future refrence,
• FInanceExpert
• Oct 13, 2017 at 10:26pm

Cost of trade credit = Discount % / (1-Discount %) x [365/(Full allowed... View the full answer

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