Question: ABC Corporation needs to raise $500000 for 1 year to supply working capital to a new store. The company buys from its suppliers on terms

ABC Corporation needs to raise $500000 for 1 year to supply working capital to a new store. The company buys from its suppliers on terms 3/10, net 90 and it currently pays on the 10th day and takes discounts. However, it could forgo the discounts, pay on the 90th day, and thereby obtain the needed $500000. What is the effective annual interest rate of this trade credit?

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