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Trade Credit The Thompson Corporation projects an increase in sales from $1.5 million to $2...

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Finance

Trade Credit

The Thompson Corporation projects an increase in sales from $1.5 million to $2 million, but it needs an additional $200,000 of current assets to support this expansion. Thompson can finance the expansion by no longer taking discounts, thus increasing accounts payable. Thompson purchases under terms of 2/10, net 30, but it can delay payment for an additional 30 days - paying in 60 days and thus becoming 30 days past due - without a penalty because its suppliers currently have excess capacity. What is the effective, or equivalent, annual cost of the trade credit? Assume a 365-day year. Do not round intermediate calculations. Round your answers to two decimal places.

Nominal cost: %

Effective cost: %

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