A firm has the following choices to finance its inventory purchase: Credit terms of 1/20 net 40 EOM A single payment note with $500,000 principal and an 7.5% annual interest rate payable in 40 days A discount loan with $500,000 principal and 6.95% annual interest rate payable in 40 days 1. Explain what the credit terms mean. 2. Calculate the cost of not taking the discount. 3. Calculate the annualized cost of (a) the single payment note and (b) the discount loan. 4. Of the available options, how should the firm finance its inventory purchase? Support your answer. ao B! n l m 1.11