A supplier has offered your company a 0.5% discount for all bills that are paid 10 days after they are billed. The bills would normally be due 30 days after they are billed. What is the return on paying the bills early? If your company can borrow funds from a line of credit at a yield of 8%, is it financially attractive to pay the bills early? The line of credit requires a compensating balance.

Answers will be presented respectively.

9.171%; It is financially advantageous to pay the bills early.

9.717%; It is financially advantageous to pay the bills early.

9.171%; It is never financially advantageous to pay the bills early, regardless of line of credit interest rate.

9.171%; It is always financially advantageous to pay the bills early, regardless of line of credit interest rate.

9.171%; It is not financially advantageous to pay the bills early.