What is a Single Equivalent Discount Rate?
In wholesale and trade industries, it is common to see a series of discounts applied to a list price. For example, a 13/15/20/8 chain discount means that a product is first discounted by 13%, then the new price is discounted by 15%, and so on. The Single Equivalent Discount Rate (SEDR) is a single percentage that represents the total effect of this entire chain.
How to Calculate the 13/15/20/8 Discount Series
To find the SEDR, we do not simply add the percentages (13+15+20+8 = 56% is incorrect). Instead, we calculate the Net Price Factor (NPF) for each step.
(1 – 0.13) = 0.87
(1 – 0.15) = 0.85
(1 – 0.20) = 0.80
(1 – 0.08) = 0.92
Step 2: Multiply the factors to get the Net Price Factor (NPF).
0.87 * 0.85 * 0.80 * 0.92 = 0.544272
Step 3: Subtract the NPF from 1 to find the SEDR.
1 – 0.544272 = 0.455728 (or 45.57%)
Why Use This Calculator?
Businesses use this calculation to compare different vendor terms. If one supplier offers a flat 45% discount and another offers a chain of 13/15/20/8, you need the SEDR to realize that the chain discount is actually better (45.57% vs 45%). This calculator allows you to input up to five discount levels to see the true mathematical impact on your bottom line immediately.
Practical Example
If you have a list price of $1,000 with a 13/15/20/8 discount series:
- After 13% discount: $870.00
- After 15% discount: $739.50
- After 20% discount: $591.60
- After 8% discount: $544.27
The final price is $544.27, which represents a total savings of $455.73 from the original $1,000 price tag.