Help cmcc simulation

TRINIGYALTRINIGYAL Just JoinedPosts: 2Registered
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...

Comments

  • CathGCathG Well-Known Posts: 145Registered
    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)
  • SandyHoodSandyHood Font Of All Knowledge Posts: 2,034Registered, Moderator
    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
    Sandy
    [email protected]
    www.sandyhood.com
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