2. The two suppliers in question offer different prices and different payment windows for the same part. We need to put the two options into the same terms by performing a price analysis.

Supplier A: $100/unit, payment due in 90 days

Supplier B: $105.50/unit, payment due in 30 days

Number of days earlier Supplier A must be paid than Supplier B (longest days to pay shortest days to pay)

Number of days earlier Supplier A must be paid than Supplier B = Daily cost of capital assuming a 20% annual cost of capital.

o Cost of Capital/days in a year =

Opportunity cost = # of days * daily cost of capital * purchase price of A

o Opportunity cost = o

Effective price for Supplier A (in like terms as B) Supplier A cost + opportunity cost =

Describe the result?