corporate finance-II

bhuyanpk
Good Student
Posts: 14
Joined: Sat Aug 08, 2015 12:12 pm

corporate finance-II

Postby bhuyanpk » Thu Aug 27, 2015 3:15 am

The invoice terms is given as: 3/15 net 90. If discount is not taken, there is some annualized cost of trade
credit. Which of the following is true?
A. For payment of invoice on 30th day, annualized cost is 16.98%. If discount is not taken in 15 days
then company should make the payment on the due date.
B. For payment of invoice on 45th day, annualized cost is 44.86%. If discount is not taken in 15 days
then company should make the payment on the due date, i.e. 90th day.
C. For payment of invoice on 60th day, annualized cost is 28.02%. If discount is not taken in 15 days
then company should make the payment on the due date, i.e. 60th day.

Can you pls explain how the calculation happening here?

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edupristine
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Posts: 722
Joined: Wed Apr 09, 2014 6:28 am

Re: corporate finance-II

Postby edupristine » Thu Aug 27, 2015 8:00 am

day30.png
day30.png (5.24 KiB) Viewed 27354 times

day45.png
day45.png (82.53 KiB) Viewed 27989 times

day60.png
day60.png (85.3 KiB) Viewed 27989 times

bhuyanpk
Good Student
Posts: 14
Joined: Sat Aug 08, 2015 12:12 pm

Re: corporate finance-II

Postby bhuyanpk » Thu Aug 27, 2015 3:56 pm

i know these formulaes used for calculating but 1st and 3rd one is NOT returning the figures as mentioned.Second thing is choice B is correct because of first part of statement that is annualized cost 44.86%? or the second part of statement?

In all of the above choice options are correct or incorrect due to which part of statement?

edupristine
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Posts: 722
Joined: Wed Apr 09, 2014 6:28 am

Re: corporate finance-II

Postby edupristine » Fri Aug 28, 2015 10:31 am

Option (b) is correct. Its statement 1st and 2nd both are correct.
The answer will be correct only if both the statements are correct. In option A, 1st part is incorrect, In option B, Both the statements are correct. In option C, 2nd part is correct.


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