Company AEG has the following trade credit options:

Option 1: 2/7, net 21.

Option 2: 4/10, net 30.

Option 3: 2/10, net 14.

By computing effective annual rate (EAR) define the best (cheapest) trade credit conditions, if you want to buy from them, which is your best option.
Your treasury position has now been harmed by the credit crisis, and you have no cash to pay with discount. You have a possibility to borrow money at a 15% annual rate, what would be your best choice now?

Answer rating: 100% (QA)

To determine the best trade credit option considering your inability to pay with a discount due to t... View the full answer