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# Answer to Question #14072 in Other Management for john

Question #14072
5. Affleck Inc.&#039;s business is booming, and it needs to raise more capital. The company purchases supplies on terms of 1/10 net 20, and it currently takes the discount. One way of getting the needed funds would be to forgo the discount, and the firm&#039;s owner believes she could delay payment to 40 days without adverse effects. What would be the effective annual percentage cost of funds raised by this action? (Assume a 365-day year.) a. 10.59% b. 11.15% c. 11.74% d. 12.36% e. 13.01%
1
2012-09-06T09:40:41-0400
Effective percentage rate: APR = (D / (a &ndash; h)) *365, where D
&ndash; discount, %; a &ndash; discount period (days); b &ndash; duration of deferred payment
(days).
APR = (1% / (40 &ndash; 10))*365 = 12,36%.

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