The Smith Corporation has purchased $500,000 worth of inventory. The vendor offers terms of 1/15 net 45. Unfortunately, Smith does not have enough cash available to take advantage of the discount. It can borrow $500,000 from Wesson National Bank for 30 days at an annual percentage rate of 6%. Should Smith forego the discount or pay within the discount period with money borrowed from the bank?

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The Answer of The Smith Corporation has purchased $500,000 worth of inventory. The vendor offers terms of 1/15 net 45. Unfortunately, Smith does not have enough cash available to take advantage of the discount. It can borrow $500,000 from Wesson National Bank for 30 days at an annual percentage rate of 6%. Should Smith forego the discount or pay within the discount period with money borrowed from the bank?

The Smith Corporation Has Purchased $500,000 Worth of Inventory