Evaluating the Annual Interest Rate Implicit in a Sales Discount with Discussion of Management Choice of Financing Strategy
Clark’s Landscaping bills customers subject to terms 3/10, n/50.
Required:
1. Compute the annual interest rate implicit in the sales discount. (Round to two decimal places.)
2. If his bank charges 15 percent interest, should the customer borrow from the bank so that he can take advantage of the discount? Explain your recommendation.