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...

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 borrow 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.

Modify the spreadsheet in Sidebar 16-2 to calculate the total interest paid over the life of the loan. Test your spreadsheet by entering the data from Example 16-9 and Problems 11 and 12. Compare your spreadsheet’s solution to the answer to these problems. Hint: You need to add the balloon payment to Eq.(16-8).