Lets say company A is analyzing the following:
It costs them 25.5% if they give up a cash discount that is being offered by a supplier.
The local bank offers them an annual interest of 14%.
What should they do? Take the discount? or Take the local bank's loan of 14%?© BrainMass Inc. brainmass.com June 4, 2020, 12:44 am ad1c9bdddf
The company should avail the discount and if it does not have money to pay borrow the money@ 14% from the bank to ...
The solution decides whether to take cash discount or invest the said amount at the bank.