Finland Co. intends to acquire new equipment costing P2,400,000. A bank loan can finance the acquisition with a 10% discounted interest. Alternatively, the company may just delay payment to its suppliers. Presently, the company buys under terms 2/10, net/40, but management believes payment could be delayed 30 additional days, without penalty; that is, payment could be made in 70 days. What should the company do?

Multiple Choice

a. Borrow since it is cheaper by 1.13% than delaying payment to suppliers

b. Borrow since it is cheaper by 2.5% than delaying payment to suppliers

c. Delay payments to suppliers since it would cost 12% as against bank loan of 10%

d. Delay payments to suppliers since it does not cost anything