Chapter 16, Problem 53P

A supplier has offered your company a 1% discount for all bills that are paid 15 days after they are billed. The bills would normally be due 45 days after they are billed. What is the return on paying the bills early? If your company can barrow funds from a line of credit at a yield of 13%, is it financially attractive to pay the bills early? The line of credit requires a compensating balance.