# Answer on Other Management Question for john

Question #14072

5. Affleck Inc.'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'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%

a. 10.59%

b. 11.15%

c. 11.74%

d. 12.36%

e. 13.01%

Expert's answer

The answer is D.

Effective percentage rate: APR = (D / (a – h)) *365, where D

– discount, %; a – discount period (days); b – duration of deferred payment

(days).

APR = (1% / (40 – 10))*365 = 12,36%.

Effective percentage rate: APR = (D / (a – h)) *365, where D

– discount, %; a – discount period (days); b – duration of deferred payment

(days).

APR = (1% / (40 – 10))*365 = 12,36%.

Need a fast expert's response?

Submit orderand get a quick answer at the best price

for any assignment or question with DETAILED EXPLANATIONS!

## Comments

## Leave a comment