Nacho Co is a multinational company which has been reviewing its working capital management.

Nacho Co has received an offer of a discount for bulk purchase from Taco Co$,$ one of its major suppliers. Taco Co has offered a $0\mathrm{.}75\%$ discount on orders of $30,000$ units or more of Component X$.$ The current purchase price of component X is $$20.$ Nacho Co currently consumes $120,000$ units of Component X each year and places orders of $10,000$ units at the end of each month. Holding cost for Component X is $$1\mathrm{.}20$ per unit per year and ordering costs are $$125$ per order.

Salsa Co$,$ a major supplier of Component M to Nacho Co$,$ has offered a $1\%$ early settlement discount for payment within $20$ days. Nacho Co currently takes $60$ days to settle outstanding invoices with Salsa Co and this equates to $$3\mathrm{.}3$m as a trade payable.

Nacho Co has a cost of short$-$term finance of $5\%$ through an overdraft and no surplus cash. Assume that there are $360$ days in each year.

Nacho Co currently has decentralised treasury operations, but is considering implementing a centralised treasury department.

What is the financial consequence of accepting the early settlement discount?

$$

Benefit of $$143,000$ per year

Cost of $$77,000$ per year

Cost of $$88,000$ per year

Benefit of $$88,000$ per year