Jiggs Corporation, a merchandising firm, purchases merchandise from its suppliers on credit terms of 2/10, net 30. Jigg needs cash, so it is considering two alternatives:

Alternative 1 - Obtain a short-term loan from a bank at an effective

interest rate of 12%.

Alternative 2 - Forego the discount on its credit purchases and pay

on the 30th day of the term.

Jiggs should choose (Use a 360 day year).

Group of answer choices

Alternative 1 because its cost is cheaper by 1%

Alternative 1 because its cost is lower by 3%.

Alternative 1 because its cost is cheaper by 24.73%

Alternative 2 because its cost is cheaper by 10%.

Alternative 2 because this is a costless credit financing.