CMA Study Group

Activity measures and financing

  • 1.  Activity measures and financing

    Posted 22 days ago
    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  Question: 15Assuming a 360-day year and that CyberAge continues paying on the last day of the credit period, the company's weighted-average annual interest rate for trade credit (ignoring the effects of compounding) for these two vendors is ....
    Can anyone explain the above mentioned....