Mavericks Cosmetics buys $4,347,116 of product (net of discounts) on terms of 8/10, net 60, and it currently pays on the 10th day and takes discounts. Mavericks plans to expand, and this will require additional financing. If Mavericks decides to forego discounts, what would the effective percentage cost of its trade credit be, based on a 365-day year

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abiolataiwo2015 abiolataiwo2015 · Answer 1 · 2021-04-22T04:37:19+02:00

Answer:

15.59%

Explanation:

Calculation to determine what would the effective percentage cost of its trade credit be

Effective percentage cost=1+(.08/1-.08)]^(365/10)-1

Effective percentage cost=1.08^36.5-1

Effective percentage cost=15.59%

Therefore the effective percentage cost of its trade credit be 15.59%

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Tundexi Tundexi · Answer 2 · 2021-12-14T11:29:42+01:00

if Mavericks decides to forego discounts, then, 83.80% would be the effective percentage of cost of its trade credit.

Here we are to calculate what would the effective percentage cost of its trade credit.

Effective cost of not taking discount = (1 + (%Discount / (1-Discount%)^ (365/(Total days - Discount days)) - 1

Effective cost of not taking discount = [1 + (8/92)]^[365 / (60 - 10)] - 1

Effective cost of not taking discount = 1.8380 - 1

Effective cost of not taking discount = 0.8380

Effective cost of not taking discount = 83.80%

Therefore, if Mavericks decides to forego discounts, then, 83.80% would be the effective percentage of cost of its trade credit.

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