Detailed Answer
Answer (C) is correct. With average payments of $1,500,000 per day, the firm delays payments of $4,500,000 ($1,500,000 × 3 days). The rate at which average interest is saved or earned is calculated by weighting the two interest rates by the proportion of the year that each is earned: 7% × 8 months = 56 4% × 4 months = 16
72 ÷ 12 months 6 The savings is $270,000 ($4,500,000 additional cash available × 6%).