The Reynolds Corporation buys from its suppliers on terms of $2/15,$ net $55.$ Reynolds has not been utilizing the discounts offered and has been taking $55$ days to pay its bills.

Ms$.$ Duke, Reynolds Corporation's vice president, has suggested that the company begin to take the discounts offered. Duke proposes that the company borrow from its bank at a stated rate of $21$ percent. The bank requires a $15$ percent compensating balance on these loans. Current account balances would not be available to meet any of this compensating balance requirement.