Peter OToole is a new accountant with First Step Company. First Step purchased merchandise on account for $18,000. The credit terms are 2/10, n/30. Peter has talked with the companys banker and knows that he could earn 5% on any money invested in the companys savings account.

(a)

Should Peter pay the invoice within the discount period or should he keep the $18,000 in the money market account and pay at the end of the credit period? Support your recommendation with a calculation showing which action would be best.

Peter should/should not take the discount as it will result in savings/loss of $