Simple Simon's Bakery purchases supplies on terms of 1.0 / by 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 12.0% on borrowed funds. Should Simple Simon's enter the loan agreement with the bank and begin taking the? discount ? (Use 365 days for a year.)
Simple Simon's can earn an effective rate of ____ % ?(Round to one decimal place.)
Should Simple Simon's enter the loan agreement with the bank and begin taking the discount ? (Select the best choice below.)
A. Simple Simon's will earn 27.7% on its purchases by paying within the discount period and should enter into the loan agreement.
B. Simple Simon's will earn 15.8% on its purchases by paying within the discount period and should enter into the loan agreement.
C. The discount rate of 1.0% is considerably lower than the 12.0% interest rate, so Simple Simon's should not enter into the loan agreement.
D. Need more information to answer the question.