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Firm Z is short on cash but has $2 million of its $5 million credit line available at present, however.
Firm Z is short on cash but has $2 million of its $5 million credit line available at present, however. If the annualized interest rate on the credit line is less than the annualized cash discount rate on trade credit received, the payment decision that maximizes firm value is to
a.Compare the annualized cash discount rate to the daily investment rate, and take the discount if the cash discount rate exceeds the investment rate
b.Not take the discount , and pay at the end of the credit period
c.Borrow the necessary funds and take the cash discount
d.Compare the annualized cash discount rate to the daily investment rate, and take the discount if the cash discount rate is le(less) than the investment rate.
