Answer:
option (d) 26,712
Step-by-step explanation:
Data provided in the question:
Terms for buying = 2/15, net 60 days
Net purchases amount = $650,000 per year
Now,
Per credit cycle purchase = Net purchases amount × [ 60 ÷ 365 ]
= $650,000 × 0.16438
= $106,849.315
Free trade per credit cycle = Per credit cycle purchase × [ 15 ÷ 60 ]
= $106,849.31 ÷ 0.25
= $26,712.33 ≈ $26,712
Hence,
The correct answer is option (d) 26,712
The amount of free trade the firm receives is $26712
The given parameters are:
Terms = 2/15, net 60 days
Net purchases amount = $650,000 per year
Start by calculating the per credit cycle purchase
Per credit cycle purchase = Net purchases amount * 60/365
Where 60 and 365 represents the days after the invoice date and the number of days in a year, respectively.
Substitute known values
Per credit cycle purchase = $650000 * 60/365
Per credit cycle purchase = $106849.315068
The free trade per credit cycle is then calculated as:
Free trade per credit cycle = Per credit cycle purchase * 15/60
Where 15 represents the terms
So, we have:
Free trade per credit cycle = $106849.315068 * 15/60
Free trade per credit cycle = $26712.3288
Approximate
Free trade per credit cycle = $26712
Hence, the amount of free trade the firm receives is $26712
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