Megadebt is considering a change in policy towards payment of its suppliers. At present, suppliers require payment within 45 days. Megadebt takes on average 60 days to pay its suppliers. Suppliers are now offering Megadebt a 1.5% discount provided the amount due is paid within 20 days.

Megadebt currently finances its working capital using an overdraft facility that charges interest of 10% per annum. Total credit purchases are $3,000,000 per annum and are not expected to change for the coming year.

Should Megadebt take advantage of the early settlement discount?