Grunewald Industries sells on 2/10 terms, net 40. Last year's gross sales were $4,562,500 and accounts receivable averaged $437,500. Half of Grunewald's customers paid on the tenth day and got discounts. What are the nominal and effective costs of trade credit for Grunewald's non-discount customers? (Hint: Calculate sales/day based on a 365-day year, then calculate the average accounts receivable from discount customers, and then find the DSO for non-discount customers.) Show the work. The answers in the book are Nominal Cost = 14.90% and Effective Cost = 15.89%

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To calculate the nominal and effective costs of trade credit for Grunewald Industries nondiscount customers we need to follow these steps Step 1 Calcu... View the full answer