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What is the effective annual percentage cost of forgoing

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Problem 1: 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: EM132919592

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