Increasing level of trade receivables

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JB is concerned about the increasing level of trade receivables and is considering various options to encourage customers to pay earlier. The company offers a 30 day payment term but customers are taking on average 65 days to pay. One option being considered is to offer an early settlement discount of 2·5% for customers paying within 15 days. Calculate, to the nearest 0·1%, the effective annual interest rate to JB of offering this discount if all customers pay within 15 days. You should assume a 365 day year and use compound interest methodology.

Reference no: EM132203926

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