Suppliers of company provide cash discounts

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The suppliers of a company provide cash discounts at 1/10, n/40. Other suppliers offer cash discounts of 3/10, n/40. Assuming the current market borrowing rate is 15%, which of the following decisions should the company take?

The company should not avail itself of the cash discount as the scheme represents an opportunity cost of 12.29%, which is lower than the market borrowing rate.

The company should avail itself of the cash discount as the scheme represents an opportunity cost of 37.63%, which is higher than the market borrowing rate.

The company should make payments in 35 days to break even with the market rate of borrowing.

The company should not avail itself of the cash discount as the scheme represents an opportunity cost of 37.63%, which is higher than the market borrowing rate.

Reference no: EM131549485

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