b. The implicit interest rate on stretching payables is higher than the rate on the bank loan. In the first quarter, if the company can borrow only $80 million, it must stretch payables by $30.6 million rather than $10.6 million (as in Table 30.6). Borrowing at the higher interest rate means that Dynamic incurs higher total interest payments and faces a greater need to raise cash in the second quarter. This, in turn, slows the rate at which it can pay off the bank loan. Therefore, the interest due on the bank loan in the fourth quarter is higher, and that higher interest payment absorbs some of the funds that would have been available to invest in cash or securities. The model allows us to trace the chain of implications over the course of the year.