(Answered) Exercise - inventory financing costsnichole jordan comes to

Accounting

Exercise - Inventory financing costs

Nichole Jordan comes to you for advice. She has just purchased a large amount of inventory with the terms 2/10, n/30. The amount of the invoice is $270,000. She is currently short of cash but has decent credit. She can borrow the money needed to settle the account payable at an annual interest rate of 7 percent. Nichole is sure she will have the necessary cash by the due date of the invoice but not by the last day of the discount period.

Required - Convert the discount rate into an annual interest rate.

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