Implicit cost of trade credit

Business & Finance
Tutor: None Selected Time limit: 1 Day

Book Depot Inc. sells on terms of 2/10, net 45. What is the implicit cost of trade credit under these terms? Use a 365-day year. 

Oct 6th, 2015

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The implicit cost of trade credit of not availing cash discount.
Implicit cost = Discount/(1 - discount)x 360/(credit period- discount period)
Implicit cost = 2%/(1-2%)x 365/(45-10) 21.283%

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Oct 6th, 2015

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