A firm faces a liquidity crunch and must decide between borrowing from a bank at 12% interest or stretching its payables for one quarter. If it stretches the payables it will forgo a 2% discount for timely payment. Based solely on cash flows, which would you suggest:

A. Stretching saves the firm approximately 8% per year

B. Use the bank loan; forgone a cash discount is costly

C. Stretch the payables and finance at a savings of approximately 3.75% annually

D. Use the bank loan because its represents simple interest.