Problem TWO:

A company is evaluating a potential opportunity to stretch its payment terms with a supplier for the next few months.

Annual NET Purchases $3,245,890

Purchase Terms 2/14, NET 35

Supplier approved extended NET Terms 45 days

Days per year 365

CALCULATE

FREE Trade Credit $

Average Accounts Payable at NET terms $

Effective Cost of Non-free Trade Credit % at Original Purchase Terms

Effective Cost of Non-free Trade Credit % at EXTENDED approved NET Terms

Show ALL work for ALL calculations needed for final answers entered on worksheet