Dome Metals has credit sales of $126,000 yearly with credit terms of net 90 days, which is also the average collection period.
A) Assume the firm offers a 4 percent discount for payment in 18 days and every customer takes advantage of the discount. Also assume the firm uses the cash generated from its reduced receivables to reduce its bank loans which cost 10 percent. What will the net gain or loss be to the firm if this discount is offered?