ABC outlet, a relatively new store, is a cafe that offers customers the opportunity to browse the Internet or play computer games at their tables while they drink coffee. The customer pays a fee based on the amount of time spent signed on to the computer. The store also sells books, tee shirts, and computer accessories.
ABC has been paying all of its bills on the last day of the payment period, thus forfeiting all supplier discounts. Shown below are data on ABC's two major vendors, including average monthly purchases and credit terms.
Assuming a 360-day year and that ABC continues paying on the last day of the credit period, the company's weighted annual interest rate for trade credit (ignoring the effects of compounding) for these two vendors is: