Essay
A firm currently offers terms of sale of 3/20, net 40. What effect will the following actions have on the implicit interest rate charged to customers that pass up the cash discount? State whether the implicit interest rate will increase or decrease.
a. The terms are changed to 4/20, net 40.
b. The terms are changed to 3/30, net 40.
Correct Answer:
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Current EAR = [1 + (0.03/(1 - 0.03))]365/(40 - 20) - ...View Answer
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