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It is typically beneficial for companies to take advantage of early-payment discounts allowed on purchases made on credit.
It is typically beneficial for companies to take advantage of early-payment discounts allowed on purchases made on credit. To see why this is the case, determine the effective rate of interest associated with nottaking advantage of the early-payment discount for each of the following situations. Assume in each case that payment is made on the 30th day of the billing cycle.
Required:1.What is the opportunity cost of not taking advantage of the discount associated with purchases made under the following terms: 4/10, n/30? (Do not round intermediate calculations. Enter your final answer as a whole percentage rounded to two decimal places (i.e., .1524 = 15.24%).)
2.What is the opportunity cost of not taking advantage of the discount associated with purchases made under the following terms: 3/10, n/30? (Do not round intermediate calculations. Enter your final answer as a whole percentage rounded to two decimal places (i.e., .1524 = 15.24%).)
