Question: Boles Corporation needs to raise 500 000 for one year to
Boles Corporation needs to raise $500,000 for one year to supply capital to a new store. Boles buys from its suppliers on terms of 3/10, net 90, and it currently pays on Day 10 and takes discounts; but it could forgo discounts, pay on Day 90, and get the needed $500,000 in the form of costly trade credit. Alternatively, Boles could borrow from its bank on a 12 percent discount interest rate basis. What is the EAR of the lower-cost source?
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