Question
Angel's Company is currently cash-constrained, and must make a decision about whether to delay paying one of its suppliers, or taking out a loan. They
Angel's Company is currently cash-constrained, and must make a decision about whether to delay paying one of its suppliers, or taking out a loan. They owe the supplier $21,716, but the supplier will give them a 2.75% discount if they pay in the first 18 days (when the discount period expires). That is, they can either take the discount by paying in the first 18 days, or $21,716 in 2 month(s) when the net invoice is due. What would be the cost for the firm if they forgo the discount on its trade credit agreement, wait and pay the full $21,716 in 2 month(s)?
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