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Compute effective annual rate and the annual percentage rate

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Question - You start work at a new firm and learn that it is the company policy to never take a trade discount. When you ask your boss about this, she says that the firm needs the trade credit to avoid borrowing more money. You tell her it would be cheaper to borrow than to miss taking the discounts. She tells you to prove it. You learn that most of your suppliers offer terms of 1/20, net 30. Compute the effective annual rate and the annual percentage rate. If the firm's cost of borrowed funds is 15%, should it take the discounts?

Reference no: EM133068975

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