A firm offers terms of 2/15, net 40. What effective annual interest rate does the firm earn
Question:
A firm offers terms of 2/15, 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 decreased 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: 100% (6 reviews)
The interest rate for the term of the discount is Interes...View the full answer
Answered By
Joseph Mwaura
I have been teaching college students in various subjects for 9 years now. Besides, I have been tutoring online with several tutoring companies from 2010 to date. The 9 years of experience as a tutor has enabled me to develop multiple tutoring skills and see thousands of students excel in their education and in life after school which gives me much pleasure. I have assisted students in essay writing and in doing academic research and this has helped me be well versed with the various writing styles such as APA, MLA, Chicago/ Turabian, Harvard. I am always ready to handle work at any hour and in any way as students specify. In my tutoring journey, excellence has always been my guiding standard.
4.00+
1+ Reviews
10+ Question Solved
Related Book For
Essentials Of Corporate Finance
ISBN: 9780073382463
7th Edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
Question Posted:
Students also viewed these Business questions
-
Terms of Sale a film offers terms of 2/10, net 35. What effective annual interest rate does the firm earn when a customer does not take the discount? Without doing any calculation, explain what will...
-
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...
-
A firm offers terms of 1y10, net 30. 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...
-
BACKGROUND The company, North S.L., has the following information in the Balance Sheet and Profit and Loss Account for 2016, before calculating its Corporate Tax: BALANCE SHEET ASSETS LIABILITIES...
-
Use formula (10.20) to compute the kth power of the following matrices: (a) (b) (c) (d) (e) 2 3 2 211 12 112 100 (01
-
In Exercises set up and evaluate the definite integral for the area of the surface generated by revolving the curve about the x-axis. y = 9-x -2 x 2
-
Christopher Boling was seriously injured in 2008 when vapors escaping from a gas can ignited. He filed a products liability claim against the manufacturer. To fund the litigation, Boling entered into...
-
Multiple Choice. Choose the best answer. 1. Which of the following is riot a fiduciary fund? a. Permanent fund. b. Agency fund. c. Investment trust fund. d. Pension trust fund. 2. Which of the...
-
Shelby Woods owns and operates an ice cream factory, the finest of its kind in all the world. Given that pints of ice cream are meant to be identical (for the same flavor), her company uses process...
-
Consider the planned construction of a new office building in downtown Houston at a time when office space is in surplus demand (more office space than users). Construct a risk analysis that examines...
-
Two Doors Down, Inc., has weekly credit sales of $38,600, and the average collection period is 34 days. What is TDDs average accounts receivable figure?
-
Vang, Inc., has an average collection period of 28 days. Its average daily investment in receivables is $87,000. What are annual credit sales? What is the receivables turnover?
-
How is the value of a stock determined using the dividend discount model (DDM) method? What are the limitations of the DDM method?
-
Flyers were $150 which were previously purchased on accounts are used in July Indicate the effect on the basic accounting equation
-
Marco Company shows the following costs for three jobs worked on in April. Balances on March 31 Direct materials used (in March). Direct labor used (in March) Overhead applied (March) Costs during...
-
With the following information calculate the cash conversion cycle the gross profit margin of the company is 30% Sales $ 350,000.00 Cash Balance $ 55,000.00 Accounts Receivables $ 65,000.00 Accounts...
-
A light aircraft travels 8 miles per hour less than twice the speed of a motorcycle. If motorcycle can travel 140 miles in the same time it takes the aircraft to travel 264 miles, then what is the...
-
Explain the change in cash during 2019. Income Statement: Net income: (129), dividends: (97), depreciation: (92), revenue (797), expenses: (576). Balance Sheet for 2018. Asset: (63), other current...
-
Amie, Inc., has 100,000 shares of $2 par value stock outstanding. Prairie Corporation acquired 30,000 of Amie's shares on January 1, 2015, for $120,000 when Amie's net assets had a total fair value...
-
Hotel Majestic is interested in estimating fixed and variable costs so that the company can make more accurate projections of costs and profit. The hotel is in a resort area that is particularly busy...
-
Consider the following information about two alternative credit strategies: The higher cost per unit reflects the expense associated with credit orders, and the higher price per unit reflects the...
-
Suppose a corporation currently sells Q units per month for a cash-only price of P . Under a new credit policy that allows one months credit, the quantity sold will be Q 9 and the price per unit will...
-
A public school district recently converted its budget from an object to a program format. The district is organized into three instructional divisions: elementary school (kindergarten through grade...
-
A major city in Eastern Canada is planning to build a new wastewater treatment plant to accommodate the increasing water consumption of the city, Plant construction will start in 2018 and is going to...
-
Tim, Sim, and Pim are employed as a Customer Care Agent at ABC Company Limited. Over the past years, they worked well as a team. Kim, recently employed to the company, started to feel uncomfortable...
-
Save-the-Earth Company reports the following income statement accounts for the year ended December 31. Sales discounts Office salaries expense Rent expense-Office space Advertising expense $ 850...
Study smarter with the SolutionInn App