Jiggs Corporation, a merchandising firm, purchases merchandise from its suppliers on credit terms of 2/10,...
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Jiggs Corporation, a merchandising firm, purchases merchandise from its suppliers on credit terms of 2/10, net 30. Jigg needs cash, so it is considering two alternatives:
Alternative 1 - Obtain a short-term loan from a bank at an effective
interest rate of 12%.
Alternative 2 - Forego the discount on its credit purchases and pay
on the 30th day of the term.
Jiggs should choose (Use a 360 day year).
Group of answer choices
Alternative 1 because its cost is cheaper by 1%
Alternative 1 because its cost is lower by 3%.
Alternative 1 because its cost is cheaper by 24.73%
Alternative 2 because its cost is cheaper by 10%.
Alternative 2 because this is a costless credit financing.
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