(Answered) Question two suppliers offer the same goods at the same

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Question: Two suppliers offer the same goods at the same prices, but under different credit terms. Supplier A offers terms of 1/15, net 30, whereas supplier B offers terms of 2/10, net 60. The firm can borrow from a bank at an annual interest rate of 10 percent. Which of the following would be best for the firm to do?

(i) Purchase from A and pay after 30 days.

(ii) Purchase from B and pay after 60 days.

(iii) Purchase from A, pay after 15 days, and borrow any money needed from the bank.

(iv) Purchase from B, pay after 10 days, and borrow any money needed from the bank.

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