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Answer (D) is correct . The annualized costs of not taking the discounts offered by these suppliers can be calculated using this formula: Fort Co.: Cost of not taking discount = [1% ÷ (100% – 1%)] × [360 days ÷ (30 days – 10 days)] = (1% ÷ 99%) × (360 days ÷ 20 days) ? = 1.01% × 18 = 18.18% Riley: Cost of not taking discount = [2% ÷ (100% – 2%)] × [360 days ÷ (60 days – 15 days)] = (2% ÷ 98%) × (360 days ÷ 45 days) = 2.04% × 8 = 16.32%

Answer (A) is incorrect because The bank does not offer the lowest cost source of financing.
Answer (B) is incorrect because Not paying Fort Co.’s invoices on time is not the lowest cost source of financing.
Answer (C) is incorrect because Not paying Riley Manufacturing Co.’s invoices on time is not the lowest cost source of financing.