Help needed?

abdulr
abdulr Registered Posts: 2 New contributor ?
Hi

Please can anyone help with me a question on one of the papers i am trying...
How do you work out the annual percentage cost of a discount where an average invoice value if given, along with normal terms of trade which is 90 days, and a 2% discount given on payment within 30 days?

I thought i had this one cracked, but obviously not!!!

Thanks!

Comments

  • crispy
    crispy Registered Posts: 465 Dedicated contributor ? ? ?
    Assuming a 365 day year then: -

    100/98 = 1.0204
    365/60 = 6.083

    1.0204^6.083 - 1 = 0.13

    = 13 %

    There is probably another way to work it out but I belive this is correct answer.
  • abdulr
    abdulr Registered Posts: 2 New contributor ?
    Hi


    Thanks for the info. The question mentions that the average invoice value is 2k, where does this come into it? In fact, this is the whole question:

    ABC company is considering giving discounts for prompt payments. The average customer invoice is 2k, and normal terms are 90 days. ABC is considering giving a 2% discount for payment within 30 days. Calculate annual percentage cost of this discount.

    Does it matter what the average customer invoice value it?
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