Answer to Question #132268 in Finance for sme

Question

Assume that a firm is offered 2/10 net 30, indicating that if the account is settled in 10
days, the firm may keep a discount of 2%. If the discount is not taken, then the full
amount is payable in 30 days. Calculate the cost of foregoing the discount.

Answer 1

If a customer purchases $7,000 from Company A on the terms 2/10 net 30 and pays within 10 days, the customer only needs to pay

$7.000 \times0.98 = 6.860.$

On the other hand, if the customer pays after 10 days, he must pay the full amount of $7,000.