A company is considering offering its customers an early settlement discount. The company currently receives payments from customers on average 65 days after the invoice date. The company is considering offering a 2 percent early settlement discount for payment within 30 days of the invoice date.
The effective annual interest rate of the early settlement discount using compound interest methodology and assuming a 365 day year is:
(a) 22.94%
(b) 20.86%
(c) 23.45%
(d) 27.85%