The Thompson Corporation projects an increase in sales from $1.5 million to $2.5 million, but it needs an additional $25
Posted: Thu Apr 28, 2022 1:53 pm
The Thompson Corporation projects an increase in sales from $1.5
million to $2.5 million, but it needs an additional $250,000 of
current assets to support this expansion. Thompson can finance the
expansion by no longer taking discounts, thus increasing accounts
payable. Thompson purchases under terms of 1/10, net 30, but it can
delay payment for an additional 40 days - paying in 70 days and
thus becoming 40 days past due - without a penalty because its
suppliers currently have excess capacity. What is the effective, or
equivalent, annual cost of the trade credit? Do not round
intermediate calculations. Round your answers to two decimal
places. Assume a 365-day year.
Nominal cost: ? %
Effective cost: ? %
million to $2.5 million, but it needs an additional $250,000 of
current assets to support this expansion. Thompson can finance the
expansion by no longer taking discounts, thus increasing accounts
payable. Thompson purchases under terms of 1/10, net 30, but it can
delay payment for an additional 40 days - paying in 70 days and
thus becoming 40 days past due - without a penalty because its
suppliers currently have excess capacity. What is the effective, or
equivalent, annual cost of the trade credit? Do not round
intermediate calculations. Round your answers to two decimal
places. Assume a 365-day year.
Nominal cost: ? %
Effective cost: ? %