What is the effective or equivalent

Reference no: EM13256357

The Thompson Corporation projects an increase in sales from $1.5 Million to $2 Million but it needs an additional $300,000 of current assets to support this expansion. Thompson can finance the expansion by no longer taking discounts, thus increasing accounts payable. Thompson purchases under terms of 2/10, net 30, but it can delay payment for an additional 35 days - paying in 65 days and thus becoming 35 days past due - without a penalty because its suppliers currently have excess capacity. What is the effective, or equivalent, annual cost of the trade credit?

Reference no: EM13256357

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