A firm offers terms of 2/9, net 40. What effective annual interest rate does the firm earn

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A firm offers terms of 2/9, 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 per cent.

(b) The credit period is increased to 60 days.

(c) The discount period is increased to 15 days.

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Corporate Finance

ISBN: 9780077173630

3rd Edition

Authors: David Hillier, Stephen A. Ross, Randolph W. Westerfield, Bradford D. Jordan, Jeffrey F. Jaffe

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Question Posted: Feb 22, 2024 03:02 AM

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A firm offers terms of 2/9, net 40. What effective annual interest rate does the firm earn

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Effective Interest Rate and its Changes Current scenario The firm offers terms of 29 net 40 Since th...View the full answer

Corporate Finance

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