Help needed?

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!

• 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.
• 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?