Cost of discount foregone

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X Co. is considering the discount on the credit term offered by the supplier. If the term of sale is 4/10, n/60, and if the current borrowing rate in the market is 12% per annum, what advice could you give to ABC company?

a. Do not avail the discount since the borrowing rate is lower than the cost of discount foregone.

b. Avail the discount since the borrowing rate is lower than the cost of discount foregone.

c. Do not avail the discount since the number of days it takes for the discount period to expire is ten days, which is too soon for the funds to be gathered.

d. Avail the discount since the number of days it takes for the account is 2 months, which is too long to wait.

Reference no: EM132706994

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