Purple Turtle Group buys on terms of 1.5/10, net 45 from its chief supplier. If

Question

Purple Turtle Group buys on terms of 1.5/10, net 45 from its chief supplier. If Purple Turtle receives an invoice for $1,889.99, what would be the true price of this invoice? O $1,303.15 O $1,489.31 O $1,861.64 O $1,582.39 The nominal annual cost of the trade credit extended by the supplier is Suppose Purple Turtle does not take advantage of the discount and then chooses to pay its supplier late-so that on average, . On average, Purple Turtle will pay its supplier on the 50th day after the sale. As a result, Purple Turtle can decrease its nominal cost of trade credit by by paying late.

Explanation / Answer

Price of invoice = 1,889.99 x (1 - 1.5%) = $1,861.64

Annual Cost of Credit = Discount % / (1-Discount %) x (360 / (Full allowed payment days - Discount days))

= 1.5% / (1 - 1.5%) x 360 / (45 - 10)

= 15.66%

Simple interest payment = 450,000 x 9% / 12 = $3,375

Add-on interest monthly payment = 450,000 x (1 + 6%) / 12 = $39,750

The first statement is correct.

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.