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Calculate the annual cost of not taking the discount

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Reference no: EM133205652

A company gets trade credit from its supplier. The company purchases $1000 of goods.

Formula for cost of not taking discount = k=d%/(100%-d%) x 365/(f(date) - d(date))

a. It receives terms 2/15, net 35 days.

  1. What will they pay in 5 days?
  2. Using the formula, calculate the annual cost of not taking the discount. 

b. Calculate the annual cost of not taking the discount for the following options and pick the better option for the company and explain why. 

  1. 2/10, net 20
  2. 2/10, net 40

Reference no: EM133205652

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