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Book Depot Inc. sells on terms of 3/10, net 60. What is the implicit cost of...

Book Depot Inc. sells on terms of 3/10, net 60. What is the implicit cost of trade credit under these terms? Use a 365-day year.

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Answer #1

IMPLICIT COST OF CREDIT = Discount %/(1-Discount %) x (365/(Full allowed payment days - Discount days))

IMPLICIT COST OF CREDIT = 0.03/(1-0.03) X (365/(60-10))

IMPLICIT COST OF CREDIT = (0.03/0.97) X (365/50) = 22.577%

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