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Firm X just purchased $200,000 in services from a supplier. The supplier offers a 1.5% discount if the payment occurs on delivery. Otherwise, Firm X
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Firm X just purchased $200,000 in services from a supplier. The supplier offers a 1.5% discount if the payment occurs on delivery. Otherwise, Firm X receives trade credit of net 40 days. If firm X uses a discount rate of 6%, what is the present value of the lowest cost payment option?
a. Take the discount and pay on delivery.
b. Take the discount and pay on Day 40.
c. Forgo the discount and pay on delivery.
d. Forgo the discount and pay on Day 40.
Firm X just purchased $200,000 in services from a supplier. The supplier offers a 1.5% discount if the payment occurs on delivery. Otherwise, Firm X receives trade credit of net 40 days. If firm X uses a discount rate of 6%, what is the present value of the lowest cost payment option?
| a. | Take the discount and pay on delivery. | |
| b. | Take the discount and pay on Day 40. | |
| c. | Forgo the discount and pay on delivery. | |
| d. | Forgo the discount and pay on Day 40. |
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