Newsome Inc. buys on terms of 3/15, net 45. It does not take the discount, and it generally pays after 60 days. What is the nominal annual percentage cost of its non-free trade credit, based on a 365-day year?

16.22%

Explanation:

3/15, net 45 means that if Newsome pays within 15 days, it will get discount of 3%, otherwise it can pay within 45 days in full.

Nominal annual percentage cost of non-free trade credit based on 365 days can be calculated using the below formula:

Discount % / (100%-Discount %) * (365 / (Actual credit days - Discount days))

In this case

Discount%=2%

Actual credit days=60

Discount period=15

Cost of non - free credit=2% / (100%-2%) * (365 / (60-15)

=2%/98% * (365/45)

=0.02*8.11

=16.22%