The Reynolds Company buys from its suppliers on terms of $\frac{3}{10},$ net $55.$

Reynolds has not been utilizing the discount offered and has been taking $67$

days to pay its bills. The suppliers seem to accept this payment pattern, and

Reynold's credit rating has not been hurt.

Mr$.$ Duke, Reynolds Company's vice$-$president, has suggested that the company

begin to take the discount offered. Mr$.$ Duke proposes the company borrow from

its bank at a stated rate of $16$ percent. The bank requires a $10$ percent

compensating balance on these loans. Current account balances would not be

available to meet any of this required compensating balance.

a$.$ Calculate the cost of not taking a cash discount. $($Use $365$ days in a year. Do

not round intermediate calculations. Round the final answer to $2$ decimal

places.$)$

Cost of not taking a cash discount

b$.$ Calculate the annual rate of interest if the company borrow from the bank.

$($Use $365$ days in a year. Do not round intermediate calculations. Round the

final answer to $2$ decimal places.$)$

Annual rate of Interest

$\%$

c$.$ Do you agree with Mr$.$ Duke's proposal?

Yes

No