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What will be the net dollar savings over the year

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Reference no: EM132765219

Question - Every 15 days a company receives P10,000 worth of raw materials from its suppliers. The credit terms for these purchases are 2/10, net 30, and payment is made on the 30th day after each delivery. Thus, the company is considering a 1-year bank loan for P9,800 (98% of the invoice amount). If the effective annual interest rate on this loan is 12%, what will be the net dollar savings over the year by borrowing and then taking the discount on the materials?

a. 4,800

b. 3,624

c. 1,224

d. 1,176

Reference no: EM132765219

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