Explain what is the retailer effective cost of trade credit

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Cost of Trade Credit

Problem 1: A large retailer obtains merchandise under the credit terms of 1/10, net 40, but routinely takes 70 days to pay its bills. (Because the retailer is an important customer, suppliers allow the firm to stretch its credit terms.) What is the retailer's effective cost of trade credit? Assume a 365-day year. Do not round intermediate calculations. Round answer to two decimal places.

Reference no: EM132722379

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