Del Mar Company purchased inventory costing P2,000,000 (gross of purchase discounts based on payment terms 2/10, n/30). Del Mar wants to determine which is better regarding the purchase transaction whether to finance the purchase by issuing 20% simple interest note to a bank to avail the discount on the 10th day which is to be paid at the 30th day after the purchase, or to forego the discount and pay the gross purchase on the 30th day after the purchase. Assume 360 days per year is used in determining the interest.

What will be the nominal cost of trade credit?

If Del Mar choose to avail the discount by issuing a note payable, how much will be the finance cost savings/additional cost?