To solve this problem, we need to calculate the savings David & Dora Footwear Supplies would achieve by taking the cash discount, even if they have to borrow money to do so. Let's break down the problem step by step: Invoice Amount: $2,725 Cash Discount Terms: 2.5/20, n/65. This means a 2.5% discount is available if the invoice is paid within 20 days; otherwise, the full amount is due in 65 days. Interest Rate for Borrowing: 8.5% annually Step 1: Calculate the Discount Amount [ \text{Discount} = \text{Invoice Amount} \times \text{Discount Rate} ] [ \text{Discount} = $2,725 \times 0.025 = $68.125 ] Step 2: Calculate the Amount After Discount [ \text{Amount After Discount} = \text{Invoice Amount} - \text{Discount} ] [ \text{Amount After Discount} = $2,725 - $68.125 = $2,656.875 ] Step 3: Calculate the Number of Days the Money is Borrowed The money is borrowed for the period from the discount date to the net date, which is 20 days to 65 days, so: [ \text{Days of Interest} = 65 - 20 = 45 \text{ days} ] Step 4: Calculate the Interest on the Loan First, convert the annual interest rate to a daily rate: [ \text{Daily Interest Rate} =