Exercise $3-12$A $($Static$)$ Inventory financing costs LO $3-2,3-4$

Bill Norman comes to you for advice. He has just purchased a large amount of inventory with the terms $\frac{2}{10},$ n$/30,$ The amount of the invoice is $$310,000.$ He is currently short of cash but has decent credit. He can borrow the money needed to settle the account payable at an annual interest rate of $7$ percent. Bill is sure he will have the necessary cash by the due date of the invoice but not by the last day of the discount period.

Required:

a$.$ Convert the discount rate into an annual interest rate.

Note: Use $365$ days in a year. Do not round intermediate calculations. Round your answer to $2$ decimal places. $($i$.$e$.,0\mathrm{.}2345$ should be entered as $23\mathrm{.}45).$

b$.$ Make a recommendation regarding whether Bill should borrow the money and pay off the account payable within the discount period.

$8$ Answer is complete but not entirely correct.

$\backslash$table$[[$a$.$ Annual rate,$3725,95],[$b$.$ Shouid Bill borrow the money and pay off the,Yes,$],[$account payable within the discount period?,,$]]$