Question

A company has been purchasing from two suppliers whose credit terms are as follows: Supplier A:...

A company has been purchasing from two suppliers whose credit terms are as follows:

Supplier A: 2/10 net 30

Supplier B: 1/20 net 50

Note: Invoice value: $10,000; Cost of borrowing: 10%

a.       Compute the cost of giving up cash discount for BOTH suppliers. (Use 365 days and turn the result into percentage)

b.       Should the firm take the discount from any suppliers? Explain the reason.

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