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arushi_13
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Joined: 09 Feb 2008
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Posted: 01 Feb 2009 at 22:40 \| IP Logged

CyberAge outlet, a relatively new store, is a cafe that offers customers the opportunity to browse the Internet or play computer games at their tables while they drink coffee. The customer pays a fee based on the amount of time spent signed on to the computer. The store also sells books, tee shirts, and computer accessories. CyberAge has been paying all of its bills on the last day of the payment period, thus forfeiting all supplier discounts. Shown below are data on CyberAge's two major vendors, including average monthly purchases and credit terms.

         Average
                      Monthly
   Vendor   Purchases   Credit Terms
   Web Master   $25,000   2/10, net 30
   Softidee   50,000   5/10, net 90

Assuming a 360-day year and that CyberAge continues paying on the last day of the credit period, the company's weighted annual interest rate for trade credit (ignoring the effects of compounding) for these two vendors is:

ans: 28%.

Please explain how?

Thanks a lot.

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Arushi

ms500
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Posted: 02 Feb 2009 at 05:39 \| IP Logged

Hi Arushi

25000/75000 x 360/20 x 2/98 = 0.1224

+ 50000/75000 x 360/80 x 5/95= 0.1579

so wt avg= 28 %

I hope above explains

Thanks

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arushi_13
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Posted: 02 Feb 2009 at 09:34 \| IP Logged

Thanks ms500. All the best for the 4th Feb. Please do share your experience.

How did u prepare for BEC? Did u use Becker only or some other book in addition to Becker?

Thanks a lot for all your help.

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Arushi

arushi_13
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Posted: 02 Feb 2009 at 09:43 \| IP Logged

ms500 wrote:

Hi Arushi

25000/75000 x 360/20 x 2/98 = 0.1224

+ 50000/75000 x 360/80 x 5/95= 0.1579

so wt avg= 28 %

I hope above explains

Thanks

Please can u explain why we are taking 360/20...Thanks a lot.

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Arushi

Retro
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Joined: 18 Jul 2008
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Posted: 02 Feb 2009 at 09:55 \| IP Logged

You are taking 20 days of "credit" each month based on a 360 day year. 30 days in a month minus 10 days grace=20 days credit.

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