A supplier has offered your company a 0.5% discount for all bills that are paid 10 days

Question:

A supplier has offered your company a 0.5% discount for all bills that are paid 10 days after they are billed. The bills would normally be due 30 days after they are billed. What is the return on paying the bills early? If your company can borrow funds from a at a yield of 8%, is it financially attractive to pay the bills early? The requires a compensating balance.

Line of Credit
A line of credit (LOC) is a preset borrowing limit that can be used at any time. The borrower can take money out as needed until the limit is reached, and as money is repaid, it can be borrowed again in the case of an open line of credit. A LOC is...