Assume that a supplier offered JC Penny merchandise totaling $50 million with the following trade credit terms: 2/10, n/90.

JC Penny also has an available line of credit, carrying an interest rate of 7%.

When should JC Penny make the payment to the supplier?

1. a) Day 1 (when receiving the merchandize get rid of the liability!)

2. b) On the 10th day

3. c) Day 45 (a good place in the middle)

4. d) Day 90

5. e) Any day between day 1 and 90 would be just fine.