Most of Alix Ltd.'s suppliers offer a 2 percent cash discount on purchases if invoices are paid within 10 days. Otherwise the balance is due in full within 30 days. So for a $1,000 invoice Alix would have to pay $980 within 10 days or the full $1,000 within 30 days. Alix has a policy of paying at the last possible moment.
This policy has been in effect for many years, dating back to a time when Alix was having serious cash flow problems. Should Alix change this policy and pay within 10 days and receive the discount? Assume that Alix has a line of credit that allows it to borrow at 10 percent per year. Provide calculations in support of your conclusion.