Single Equivalent Discount Rate Calculator

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Single Equivalent Discount Rate Calculator

Calculation Results

Single Equivalent Discount Rate: –
Net Price Factor (Complement): –
Final Net Price: –
Total Savings Amount: –
function calculateSEDR() { var listPrice = parseFloat(document.getElementById('listPrice').value) || 0; var d1 = parseFloat(document.getElementById('d1').value) || 0; var d2 = parseFloat(document.getElementById('d2').value) || 0; var d3 = parseFloat(document.getElementById('d3').value) || 0; var d4 = parseFloat(document.getElementById('d4').value) || 0; var discounts = [d1, d2, d3, d4]; var netPriceFactor = 1.0; for (var i = 0; i 0) { var decimalDiscount = discounts[i] / 100; // Cap discount at 100% if (decimalDiscount > 1) decimalDiscount = 1; netPriceFactor *= (1 – decimalDiscount); } } var singleEquivalentRate = (1 – netPriceFactor) * 100; document.getElementById('resSEDR').innerText = singleEquivalentRate.toFixed(3) + "%"; document.getElementById('resNPF').innerText = netPriceFactor.toFixed(4); if (listPrice > 0) { var finalNetPrice = listPrice * netPriceFactor; var totalSavings = listPrice – finalNetPrice; document.getElementById('resNetPrice').innerText = finalNetPrice.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('resSavings').innerText = totalSavings.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('netPriceRow').style.display = 'flex'; document.getElementById('totalSavingsRow').style.display = 'flex'; } else { document.getElementById('netPriceRow').style.display = 'none'; document.getElementById('totalSavingsRow').style.display = 'none'; } document.getElementById('resultsArea').style.display = 'block'; }

Understanding the Single Equivalent Discount Rate (SEDR)

In wholesale and B2B commerce, it is common to receive a "chain" or "series" of discounts rather than a single flat percentage. For example, a vendor might offer a 20/10/5 discount. This does not mean you simply add them together to get 35% off. Instead, each subsequent discount is applied to the declining balance.

The Single Equivalent Discount Rate (SEDR) is the single percentage that, when applied to the original list price, yields the same final net price as the series of discounts.

The SEDR Formula

To calculate the SEDR, we first find the Net Price Factor (NPF), which represents what percentage of the original price you actually pay. The formula is:

NPF = (1 – d1) × (1 – d2) × (1 – d3) …
SEDR = 1 – NPF

Where d represents each discount expressed as a decimal (e.g., 10% = 0.10).

Practical Example

Imagine a wholesaler offers a list price of $2,000 for electronic components with a discount series of 25%, 10%, and 5%.

  • Step 1 (NPF): (1 – 0.25) × (1 – 0.10) × (1 – 0.05) = 0.75 × 0.90 × 0.95 = 0.64125
  • Step 2 (SEDR): 1 – 0.64125 = 0.35875 or 35.875%
  • Step 3 (Net Price): $2,000 × 0.64125 = $1,282.50

Notice that adding the discounts (25 + 10 + 5 = 40%) would have given an incorrect result. The actual total discount is lower because each successive discount is calculated on a smaller remaining amount.

Why Is This Important?

Businesses use the SEDR for several critical reasons:

  • Vendor Comparison: It allows purchasing managers to compare different vendor offers that use different discount structures (e.g., is 30/10 better than a flat 38%?).
  • Inventory Valuation: Accurately calculating the cost of goods sold (COGS) requires knowing the final net price after all trade discounts.
  • Pricing Strategy: If you know your total effective discount, you can more accurately set your own retail markup to maintain target margins.

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