Suppose the Credit Terms Offered to Your Firm by Your

Multiple Choice

Suppose the credit terms offered to your firm by your suppliers are 2/10, net 30 days. Out of convenience, your firm is not taking discounts, but is paying after 20 days, instead of waiting until Day 30. You point out that the nominal cost of not taking the discount and paying on Day 30 is approximately 37 percent. But since your firm is not taking discounts and is paying on Day 20, what is the effective annual cost of your firm's current practice, using a 365-day year?

A) 36.7%
B) 105.4%
C) 73.4%
D) 43.6%
E) 109.0%