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Short-term financing-trade payables

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Reference no: EM132611725

(Short-term Financing; Trade payables)

Suppose HSF Sdn Bhd has been offered credit terms from its major supplier of '2/10, net 45'. The company has a choice of (a) paying 98 sen per RM1 on day 10 or (b) to pay RM1 on day 45. If HSF can invest cash and obtain an annual return of 25%, which option is the best, (a) or (b)?

*you are advised to use Annual Percentage Yield (APR) to estimate cost of foregoing early discount. Then compare APR and Annual return for your decision.

Reference no: EM132611725

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