Answer (D) is correct . The annualized cost of not taking a discount is calculated using this formula: ? Cost of not taking discount = [2% ÷ (100% – 2%)] × [360 days ÷ (30 days – 10 days)] = (2% ÷ 98%) × (360 days ÷ 20 days) = 2.0408% × 18 = 36.73%
Answer (A) is incorrect because This percentage results from failing to subtract the discount percentage in the denominator of the percentage fraction and from using the entire payment period in the denominator of the days fraction.
Answer (B) is incorrect because The length of the extra credit period is 20 days, not 30 days.
Answer (C) is incorrect because This percentage results from failing to subtract the discount percentage in the denominator of the percentage fraction.
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