Finance

Have Finance Questions? Ask a Financial Expert Online.

Finance

# Calculate the approximate annual rate of return on investment

Customer Question
of the following cash discount...
Calculate the approximate annual rate of return on investment of the following cash discount terms:
1) 1/15, n30.
2) 2/10, n60
3) 1/10, n90.

Which of these terms, if any, is not likely to be significant incentive to the customer to pay promptly? Explain your answer.
Submitted: 6 years ago.Category: Finance
Show More
Show Less
7/17/2011
Financial Professional: Rakhi Vasavada, Financial and Legal Consultant replied 6 years ago
Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
Satisfied Customers: 4,546
Experience: Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
Verified

Dear Friend,

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,

Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
Satisfied Customers: 4,546
4,546 Satisfied Customers
Experience: Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years

A new question is answered every 9 seconds

• Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
• Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

## What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

## Meet the Experts:

Financial and Legal Consultant

4,546 satisfied customers

Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years

Megan C

Certified Public Accountant (CPA)

2,218 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

Manal Elkhoshkhany

Tutor

1,920 satisfied customers

More than 5000 online tutoring sessions.

JKCPA

CPA

844 satisfied customers

Bachelors degree and CPA with Accounting experience.

Eric

Financial Manager

559 satisfied customers

Loan servicing, counseling and real estate expert. Foreclosure Expert and Financial Planner.

R. Klein, EA

Accountant

480 satisfied customers

TurboTax Expert. QuickBooks Certified Pro Advisor

Dimitry K., Esq.

Attorney

332 satisfied customers

< Previous | Next >

Related Finance Questions
Preferred Stock. Preferred Products has issued preferred ...
Preferred Stock. Preferred Products has issued preferred stock with an \$8 annual dividend that will be paid in perpetuity. a. If the discount rate is 12 percent, at what price should the preferred sel… read more
vinsu
Professor
Master Degree
224 satisfied customers
a stock sells for \$40. The next dividend will be \$4 per share.
a stock sells for \$40. The next dividend will be \$4 per share. if the rate of return erarned on reinvested funds is 15 percent and the company reinvests 40 percent of earning in the firm. What must be… read more
RD
Self Employed
Master's Degree
1,164 satisfied customers
1. Which of the following statements is true regarding a defined
1. Which of the following statements is true regarding a defined contribution pension plan? a) The pension benefits to be received by the employee during retirement are defined in the plan. b) Defined… read more
Manal Elkhoshkhany
Tutor
1,920 satisfied customers
Are the oil pension checks and the auto rebates and the
are the oil pension checks and the auto rebates and the insurance return checks a scam … read more
taxmanrog
Master\u0027s Degree
778 satisfied customers
I would like to know what is a reasonable rate of return on
I would like to know what is a reasonable rate of return on investment considered by the City of Oakland and are those exempt through the Costa Hawkins Act also exempt for this? … read more
Patrick Mullis
Masters
18 satisfied customers
1) Which of the following categories of owners have limited
1) Which of the following categories of owners have limited liability? A. General partners B. Sole proprietors C. Shareholders of a corporation D. Both a and b 2) Which of the following best describes… read more
Manal Elkhoshkhany
Tutor
1,920 satisfied customers
1) In terms of organizational costs, which of the following
1) In terms of organizational costs, which of the following sequences is correct, moving from lowest to highest cost? A. Sole proprietorship, general partnership, limited partnership, corporation B. C… read more
Johnmark1900
Finance Manager
Chartered Accountant
24 satisfied customers
I have rrsp sin segregated mutual funds with Canada life
Hi I have rrsp sin segregated mutual funds with Canada life would I be better off switching these over to a bank such as RBC because of fees Brian… read more
Carter McBride
LLM
265 satisfied customers
Part 1. Capital Budgeting Practice Problems a. Consider the
Part 1. Capital Budgeting Practice Problems a. Consider the project with the following expected cash flows: Year Cash flow 0 - \$500,000 1 \$100,000 2 \$110,000 3 \$550,000 If the discount rate is 0%, wha… read more
The Analyst & Strategist
Master's Degree
6 satisfied customers
I need to figure out the WACC for Southwest Airines for either
I need to figure out the WACC for Southwest Airines for either year-end 2008 or 1Q 2009. I need to know where I can locate the cost of debt, cost of equity, debt, total cost financing, equity, and equ… read more
Greg
Bachelor's Degree
16 satisfied customers
1. The primary goal of a publicly-owned firm interested in
1. The primary goal of a publicly-owned firm interested in serving its stockholders should be to (Points: 1) a. Maximize expected total corporate profit. b. Maximize expected EPS. c. Minimize the chan… read more
Manal Elkhoshkhany
Tutor
1,920 satisfied customers
1. Jakes Inc. recently reported net income of \$4,750 and depreci
1. Jake's Inc. recently reported net income of \$4,750 and depreciation of \$885. How much was its net cash flow, assuming it had no amortization expense and sold none of its fixed assets. 2. Jakes's In… read more
RD
Self Employed
Master's Degree
1,164 satisfied customers
I started a new general contracting business that will need
I started a new general contracting business that will need Approximately 20-\$30,000.00 in capital to find my first spec home before compensation (draws) from the Bank. I will be 20-\$30,000.00 behind … read more
Mark Taylor
Certified Public Accountant
Masters
2,282 satisfied customers
We have a situation with an irrevocable trust. The bank is a
Hello.We have a situation with an irrevocable trust. The bank is a co-trustee and national.. The money has been in a money market account that has been FDIC insured. The bank is dissolving these and n… read more
TaxAttorneytoHelp
Owner
Doctoral Degree
2,542 satisfied customers
I'm a soon to be divorced single mom, age 44, living on
Hello. I'm a soon to be divorced single mom, age 44, living on mostly alimony for the next 3 years. Can you help me understand how much I should be saving for retirement each month? I ill have about 3… read more
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,084 satisfied customers
I work in life insurance policy analysis. We are a fairly
I work in life insurance policy analysis. We are a fairly new venture and are figuring out how we want to engage in reviewing variable policies. My greatest concern with them is the sub account alloca… read more
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,084 satisfied customers
I need about 2K more income per month to keep nose above water. I have about 66K savings. what amount of investment woutd yield the 2K income? … read more
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,084 satisfied customers
Why is it that in evaluating commercial properties, the cap
why is it that in evaluating commercial properties, the cap rate (rate of return) is inversely related to the present value? i'd think that the higher the rate of return, the more desirable the proper… read more
Matthew Breecher
President