A firm offers terms of 2/10, net 40. What effective annual interest rate does the firm earn
Question:
A firm offers terms of 2/10, net 40. What effective annual interest rate does the firm earn when a customer does not take the discount? Without doing any calculations, explain what will happen to this effective rate if:
a. The discount is changed to 3 percent.
b. The credit period is increased to 60 days.
c. The discount period is increased to 20 days.
d. What is the EAR for each scenario?
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Answer rating: 83% (6 reviews)
The interest rate for the term of the discount is Interest rate 0298 Interest rate 02...View the full answer
Answered By
Nazrin Ziad
I am a post graduate in Zoology with specialization in Entomology.I also have a Bachelor degree in Education.I posess more than 10 years of teaching as well as tutoring experience.I have done a project on histopathological analysis on alcohol treated liver of Albino Mice.
I can deal with every field under Biology from basic to advanced level.I can also guide you for your project works related to biological subjects other than tutoring.You can also seek my help for cracking competitive exams with biology as one of the subjects.
3.30+
2+ Reviews
10+ Question Solved
Related Book For
Essentials Of Corporate Finance
ISBN: 9780073405131
6th Edition
Authors: Stephen A. Ross, Randolph Westerfield, Bradford D. Jordan
Question Posted:
Students also viewed these Corporate Finance questions
-
A firm purchases materials on terms of 2/10, net 70 and it can borrow the funds from a bank at an APR of 16%. Should the firm use the bank loan by taking the discount or the full credit period by...
-
A firm offers terms of 2/10, net 30 a-What effective annual interest rate does the firm earn when a customer does not take the discount? (Use 365 days a year. Do not round intermediate calculations....
-
Explain what will happen to U.S. potential GDP, employment, and real wage rate. Suppose that the United States cracks down on illegal immigrants and returns millions of workers to their home...
-
The electric fields at point P due to the positive charges q 1 and q 2 are shown in Fig. Q21.22. Does the fact that they cross each other violate the statement in Section 21.6 that electric field...
-
Based on a survey of master's programs in business administration, magazines such as U.S. news & World report rank U.S. business schools. These types of rankings are based in part on surveys of...
-
You are the audit manager for the audit of Master Mines Limited. It is a listed company in Hong Kong, specializing in sulphur exploitation in various parts of the world (with five different...
-
A screw propeller has the following relevant dimensional parameters: axial thrust, \(F\), propeller diameter, \(D\), fluid kinematic viscosity, \(v\), fluid density, \(ho\), gravitational...
-
The local bank offers to pay 5% interest on savings deposits. In a nearby town, the bank pays 1.25% per 3 month period (quarterly). A man who has $3000 to put in a savings account wonders whether the...
-
why metals to be welded by FCAW must be cleaned either chemically or mechanically. Do any metals need need both chemical and mechanical cleaning? Explain.
-
Wholly Donuts Ltd is a medium-sized doughnut manufacturer. 1. Apply value chain and other classifications to the costs listed below. (More than one classification may be appropriate for each cost...
-
Two Doors Down, Inc., has weekly credit sales or $44,500, and the average collection period is 25 days. What is TDDs average accounts receivable figure?
-
Then and Now, Inc., has an average collection period of 37 days. Its average daily investment in receivables is $92,000. What are annual credit sales? What is the receivables turnover?
-
Designer Architects had the following additional information at its November 30, 2020, year-end: a. The Unearned Revenue account showed a balance of $62,000, which represented four months of services...
-
Two firms A and B control the market for mouth guards and face a market demand curve for mouth guards given by Q = 320 4P where Q is the total sales of mouth guards. The short-run cost curves of...
-
Interest rates have a huge impact on the national and global economy, as well as for specific business practices.Visit the website of a local bank and see what rates are being applied to business...
-
Da Feng is looking to refinance his home because rates have gone down since he purchased the house 5 years ago. He started with a 30-year fixed-rate mortgage of $222,000 at an annual rate of 7.10%....
-
Using the information, answer the following questions: One year spot rate Two year spot rate Three year spot rate 1.25% p.a. 1.30% p.a. 1.50% p.a. What is the market consensus expectation of one year...
-
return is 17% ,beta is 1.7 risk free is 3% what is market risk premium. 2. dividend of 7.98 rate of return is 21% what is current stock price. 3. coupon rate is 10% maturity of 8 yrs current market...
-
What is the difference in treatment when an incoming partner purchases an interest by agreeing to perform services for the partnership and the partnership (1) gives a 25 percent interest in the...
-
An investor sells a European call on a share for $4. The stock price is $47 and the strike price is $50. Under what circumstances does the investor make a profit? Under what circumstances will the...
-
Translate into symbols and identify the type of argument. If there are a finite number of primes, then there is some natural number, greater than 1, that is not divisible by any prime. Every natural...
-
The Smathers Company has a long-term debt ratio (i.e.. the ratio of long-term debt to long-term debt plus equity) of .45 and a current ratio of 1.30. Current liabilities are $2,435, sales are...
-
In response to complaints about high prices, a grocery chain runs the following advertising campaign: "If you pay your child $2 to go buy $50 worth of groceries, then your child makes twice as much...
-
Ordonez Lumber Yard has a current accounts receivable balance of $583,174. Credit sales for the year just ended were $6,787,626. What is the receivables turnover? The days' sales in receivables? How...
-
Based on the NPV and IRR investment criteria, should your company introduce a new candy flavor? 1) Should the cost of a marketing survey be included in your decision? Why or why not? 2) Calculate the...
-
You invest into Malaysian stock market. On 3 May 2021, construct an investment portfolio. State the reason(s) for selecting those financial assets available in the Malaysian stock market. (b) To...
-
Line spectra for atoms is generated by electronic transitions between quantum energy levels. For the hydrogen atom we established that in the absence of external fields the energy depends only on the...
Study smarter with the SolutionInn App