If a firm buys on trade credit terms of 3/10, net 50 and decides to forgo the trade credit discount and pay on the net day, what is annualized cost of forgoing the discount (assume a 360-day year)?

Question

The annualized cost of the trade credit terms of 3/10, net 50 is ___%

Answer 1

0.03/1-0.03*360/(50-10)
=10.08/0.97*40
=10.08/38.8
=0.27835 ie 27.385%