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Dear Friend,

Your Calculations are as under:

Annual rate on return on Investments is calculated as under:

Cash Discount Rate * (365/(Term of Payment - Cash Discount Period))

Thus, in case 1, i.e. 1/15, n30.,

1*(365/(30-15)) = 1*(365/15) = 1* 24.33 = 24.33%

In case 2, i.e. 2/10, n60,

2*(365/(60-10)) = 2*(365/50) = 2*7.30 = 14.60%

In Case 3, i.e. 1/10, n90

1*(365/(90-10)) = 1*(365/80) = 1*4.56 = 4.56%

So, in above case, the third term, i.e. 1/10, n90 will not give any significant incentive customer to pay promptly as the return is the lowest.

I hope this helps...

Warm Regards,