Single Equivalent Discount Rate Calculator
Enter Series Discounts (%)
Calculation Results
What is the Single Equivalent Discount Rate?
The Single Equivalent Discount Rate (SEDR) is a single discount percentage that represents the total effect of a series of trade discounts. In business-to-business transactions, wholesalers often provide multiple discounts (e.g., 20%, 10%, and 5%) instead of one flat rate. The SEDR identifies what specific single percentage would result in the same final price as that series of discounts.
How to Calculate SEDR
To find the single equivalent discount rate, you do not simply add the percentages together. Instead, you must calculate the "complement" of each discount rate, multiply them to find the Net Price Factor, and then subtract that result from 1.
Formula:
SEDR = 1 – [(1 – d1) × (1 – d2) × (1 – d3) …]
Where d1, d2, etc., are the discount percentages expressed as decimals.
Practical Example
Suppose a vendor offers a "25/10" discount on a product with a list price of $1,000. Here is the step-by-step math:
- Step 1: Find the complements. (1 – 0.25) = 0.75 and (1 – 0.10) = 0.90.
- Step 2: Multiply the complements (Net Price Factor). 0.75 × 0.90 = 0.675.
- Step 3: Calculate SEDR. 1 – 0.675 = 0.325 or 32.5%.
- Step 4: Calculate Net Price. $1,000 × 0.675 = $675.00.
Notice that adding the discounts (25 + 10 = 35%) would be incorrect. The true savings is 32.5% because each subsequent discount is applied to a value that has already been reduced.
Why Businesses Use Series Discounts
Series discounts allow manufacturers and wholesalers to offer flexible pricing based on various factors such as order volume, payment speed (cash discounts), or seasonal promotions. By using the Single Equivalent Discount Rate, procurement managers can quickly compare different vendor offers to see which one provides the deepest overall savings without manually calculating the final price for every single item.