Detailed Answer
(d) The requirement is to identify the statement that
determines whether Cyber Age should continue to use the trade
credit. Answer (d) is correct because the company should continue
to use the trade credit as long as the alternative cost of other
forms of financing is higher. Answer (a) is incorrect because if
alternative sources are less, the alternative should be used. Answer
(b) is incorrect because in considering short-term financing
alternatives, it is the marginal cost of capital that is important, not
the weighted-average cost of capital. Answer (c) is incorrect
because if the cost of long-term financing is greater, the trade
credit should be used.