Financial management: Can you calculate for me please?

T%26amp;T pays its supplier 40 days after receiving the goods and receives no settlement discount. The supplier has recently offered T%26amp;T revised credit terms of 3/10, net 40. If T%26amp;T refuses the settlement discount and pays in full after 40 days, what is the approximate, implied, interest cost (in % terms) that is incurred by T%26amp;T per year?

If the normal borrowing rate for T%26amp;T from its bank is 12% p.a. Should T%26amp;T take the offer from its supplier? Very briefly explain why?

Financial management: Can you calculate for me please?business loan

I%26#039;m not sure about the implied interest cost. But,

%26quot;Even if the buyer has to borrow to make the payment within a discount period, it is normally to the buyer%26#039;s advantage to do so.%26quot;

Say the supplier sends an invoice for $3,000 to T%26amp;T. Assume that in order to pay the invoice on the last day of the discount period, T%26amp;T borrows the money for the remaining 30 days of the credit period. If the interest rate is 12%, the interest on the loan of $2,910 ($3,000 - $90) is $29.10 ($2,910 * 12% * (30/360)) . The net savings to T%26amp;T is $60.90

Discount of 3% on $3,000_____________$90.00

Interest for 30 days at 12% on $2,910___-29.10

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Savings from borrowing_______________$60.90

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And perhaps from this example we can infer that the approximate implied interest cost of not taking the offered discount on any purchases is (60.90)/(3000) 鈮?2%??

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Edit: My friend, the second sentence in my answer is valid. It is almost always better for a company to take purchase discounts if possible (most companies design their financing to achieve this!) unless the interest rate of financing is astronomical!!

My answer: Yes! they should accept the terms and pay within the discount period! My equation above is based on a 360 day year (which is the normal accounting convention for number of days in a year)

PS I have no clue regarding what your equation represents...