What is the ear on the lower cost of source


Boles Corporation needs to raise $500,000 for one year to supply capital to a new store. Boles buys from its suppliers on terms of 3/10, net 90, and it currently pays on Day 10 and takes discounts, but it could forgo discounts, pay on Day 90, and get the needed $500,000 in the form of costly trade credit. Alternatively, Boles could borrow from its bank on a 12-percent discount interest basis. What is the EAR on the lower cost of source?

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Finance Basics: What is the ear on the lower cost of source
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