Calculate the cost of financing for each option

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Problem - To sustain its growth in sales, Company ABC Inc. needs $100,000 in additional funds next year. The following alternatives for ?nancing the growth are available:

i. Forgoing a discount available on trade credit with terms of 1/20. n50 and, hence, increasing its accounts payable.

ii. Obtaining a loan from a bank at 10 percent interest paid up front.

Required - Calculate the cost of financing for each option and select the best source.

Reference no: EM132982763

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