Is there a cost for the trade credit the firm uses

Reference no: EM13282390

Suppose a firm makes purchases of $3.6 million per year under terms of 2/10, net 30, and takes discounts.
(a) Is there a cost for the trade credit the firm uses?
(b) If the firm did not take discounts and it paid on time, what would be the APR and EAR of this non-free trade credit?
(c) What would be the APR and EAR of not taking discounts if the firm could stretch its payments to 40 days?

Reference no: EM13282390

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