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# Suppose the credit terms are "1/15, net 30." The equivalent annual percentage interest rate if the customer skips the discount and pays at the end of...

Suppose the credit terms are "1/15, net 30." The equivalent annual percentage interest rate if the customer skips the discount and pays at the end of 30 days = \$1/\$99 x (365/15) = 24.58%

Suppose the buyer "stretches" the payment period by actually paying in 40 days. That is, the buyer unilaterally takes an extra 10 days to pay. The buyer does not get the discount, but does get an "extra" 10 days of credit. Does that have any effect on the implicit cost of trade credit? If so, how much?

Answer: Yes. The implicit cost of trade credit would be 24.83%. How did we get that answer?

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