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 This percentage results from adding, rather than subtracting, the discount percentage in the denominator of the percentage fraction.
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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