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Please, : a company have sales 200m pa. Currently customers 40 days to pay. The company is considering offering a discount 1% for payment in 15 days and expects 60% customer to take it. What EAC? Why 15.80% and not 15.63%? Thank you,
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Dear sir, please allow me to add something more into d question asked,
By using the following formula we get
15.80% (right Answer)
[100/99]^365/25I found in couple of books wherein they used the following formula,
1/99 × 365/25 = 14.76% (not even near to the right answer but as per examples given in their books if we use 2nd fomula we get the right answer and the 1st one does not work.)I’ll be grateful to you if you could explain when to use which formula.
Many thanks!The examiner used to accept either way, but the way giving the right answer (15.80%) is strictly more correct.
Now, with MCQ’s it is more important to do it the strictly more correct way.
mpi9 should not have used the expression EAC. He/she was wanted the equivalent annual interest rate and momin194 has shown the workings (above).
Equivalent annual cost relates to replacement, which is obviously a completely different topic.
sorry … my mistake.
But even with normal formula EAinterestC = (100/100-1)^14.6 = 15.63
Dear Sir,
right now i saw that i have to take 1.010101 for giving me that 15.80. I did only 1.01^14.6. So, i could be wrong in these mcq and could lose if i will not take all decimals.
Thank you so much,
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Thanks a lot sir, you are great!
Sorry sir but I still dont understand why is he using this formaul. I know how he got 25 but why 365÷25?
There are 365 days in a year, so to convert from 25 days to 365 days we take it to the power 365/25
Dear Sir, I have been confused by this question. I calculate the 25days and I saw in the BPP textbook that [100/(100-discount rate)]^(365/t)-1, this formular, in which t means the reduction in period. If this explanation were used ,then I should use 40/(40-25?instead of 40/25 and get answer in no match to any of the 4 choices T-T
Perhaps my country set a block on the Internet that I can’t get access to your lectures. So would you please give me a brief guide on this formular? Thank you.
BTW, are there any detailed explanations of answers on the opentuition revision mock exam? Thx~
The formula you have quoted is correct.
365 is 365!
t is the reduction in the period which is 40 – 15 = 25This is what we have been writing all along, and I have no idea what you are meaning by writing 40/25.
You should be able to access the lectures – try a different browser, or visit the support page in this website. I cannot type out lectures here.
With regard to the mock exam, if you read the page that leads into the exam you would have seen that although you can check your answer after the test, if you want workings then you need to copy the relevant question into this forum.
(However, most questions have already been asked – if you use the search box or look at the names of the threads in this forum then you will likely find the questions that you want.)
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