Assume the firm actually takes 80 days to pay its bills should it take the cash discount?

Midland Chemical Co. is negotiating a loan from Manhattan Bank and Trust. The small chemical company needs to borrow $500,000. The bank offers a rate of 8� percent with a 20 percent compensating balance requirement, or as an alternative, 9� percent with additional fees of $5,500 to cover services the bank is providing. In either case the rate on the loan is floating (changes as the prime interest rate changes), and the loan would be for one year.