Question
Company A is currently cash-constrained, and must make a decision about whether to delay paying one of its suppliers, or taking out a loan. They
Company A 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 $12,560, but the supplier will give them a 2.64% 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 $12,560 in 1 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 $12,560 in 1 month(s)?
NOTE: Answer in percentages. If your answer is 0.0204, you must answer 2.04. Do not use the "%" sign.
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