To sustain its growth in sales, Monarch Machine Tools Company needs $100,000 in additional funds next year. The following alternatives for financing the growth are available:
a. Forgoing a discount available on trade credit with terms of 1/10, n45 and, hence, increasing its accounts payable
b. Obtaining a loan from a bank at 10 percent interest paid up front
Calculate the cost of financing for each option and select the best source.