A company is concerned about its cash flow position. It has reviewed its trade receivable days and is considering offering an early settlement...

A company is concerned about its cash flow position. It has reviewed its trade receivable days and is considering offering an early settlement discount. The company currently receives payments from customers on average 65 days after the invoice date. The company's current credit terms are 30 days after the invoice date. The company is considering offering a 2% early settlement discount for payment within 20 days of the invoice date. Calculate the effective annual interest rate of the early settlement discount. You should use compound interest methodology and assume a 365 day year.