Ch $16-$ Assignment $-$ Working Capital Management

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Keep the Highest $\frac{0}{3}$

$4.$ Cost of trade credit

Firms usually offer their customers some form of trade credit. This allowance comes with certain terms of credit, which will affect the actual cost of asset being sold for the buyer and the seller.

Consider this case:

$q,$

Tasty Tuna Corporation buys most of its raw materials from a single supplier. This supplier sells to Tasty Tuna on terms of $1\mathrm{.}5/20,$ net $45.$

$q,$

The cost per period of the trade credit extended to Tasty Tuna is your final answer to two decimal places.$).$

Tasty Tuna's trade credit has a nominal annual cost of $,$ assuming a $365-$day year. $($Note: Round all intermediate calculations to four decimal places, and your final answer to two decimal places.$)$

If Tasty Tuna Corporation's supplier shortens its discount period to five days, this will

the cost of the trade credit.

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