A farmer purchases $500 per day of input supply, 360 days per year. This totals annual purchases
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A farmer purchases $500 per day of input supply, 360 days per year. This totals annual purchases of $180,000. If the farmer takes the early payment discount, he saves 3% of $180,000, or $5,400. Since the farmer always pays each invoice on the tenth day, there will be $5,000 owed in accounts payable at all times. If the farmer pays all invoices on the thirtieth day, he has obtained an additional financing of:
| $5,000 | ||
| $10,000 | ||
| $15,000 | ||
| $20,000 |
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