Help cmcc simulation

TRINIGYAL

does anyone remember how to calculate the annual percentage cost of discount in the simulation. It was task 7 - invoice £700 but 5% discount will be offered if the invoice is paid in 14 days...

CathG

I've been learning this today -

You'll also need how many days for the normal settlement period -

the formula is:

(d/(100-d)) x (365/(N-D)) x 100


where d = settlement discount percentage (5%)
N = Normal Settlement Period in days (?)
D = Settlement period for early repayment in days (14 days)

SandyHood

TRINIGYAL

1. CathG has correctly given the simple interest formula :

   (d/(100-d)) x (365/(N-D)) x 100

2. I have told my class that if they use this formula they should add this sentence:

3. This value is the simple interest percentage rate rather than a true compounded annual percentage so is under valuing the true cost to the business.

4. The annual percentage cost of discount involves a geometric calculation so it has to be done using a calculator that has a "to the power of" button.

5. 1+(d/(100-d))^ (365/(N-D))-1