SUBJECT: Payables

"Suppose a firm makes purchases of $3.65 million per year under terms of 2/10, net 30, and takes discounts. Is there a cost of the trade credit the firm uses? If the firm did not take discounts but did pay on the due date, what would be its average payables and the cost of this nonfree trade credit? What would be the firms cost of not taking discounts if it could stretch its payments to 40 days?"