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What is the EAR of the lower cost source

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Problem - Clicker Corporation must raise $50,000 to support operations for the next 12 months. Clicker buys from its suppliers on terms of 2.5/20, net 80, and it normally pays on Day 20 to take the cash discounts; but, it could forgo the discounts and pay on Day 90 to get the needed amount in the form of non-free trade credit. Alternatively, Clicker can borrow from its bank using a one-year discount interest loan that has a 12 percent quoted interest rate and requires a 15 percent compensating balance. Clicker normally maintains a negligible deposit at the bank. What is the EAR of the lower cost source? Assume the face value of the bank loan is $50,000.

Reference no: EM132698839

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