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What is the effective annual percentage cost

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Question - A company is about to stop taking cash discounts for early payment on $500,000 of purchases from a supplier who is offering terms of 1/20 net 60. What is the effective annual percentage cost of forgoing this cash discount to the nearest full percentage point? Use a 365 day year in your calculations.

a) 1%

b) 5%

c) 10%

d) 20%

e) None of the other answers

Reference no: EM133019071

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