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Should Simple Simon enter the loan agreement

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Question - Simple Simon's Bakery purchases supplies on terms of 1.3/10, net 25. If Simple Simon's chooses to take the discount offered, it must obtain a bank loan to meet its short-term financing needs. A local bank has quoted Simple Simon's owner an interest rate of 10.4% on borrowed funds. Should Simple Simon's enter the loan agreement with the bank and begin taking the discount?

The cost of forgoing the discount is 2%. Should Simple Simon's enter the loan agreement with the bank and begin taking the discount?

Reference no: EM133033620

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