Your Firm Buys on Credit Terms of 2/10, Net 45

Multiple Choice

Your firm buys on credit terms of 2/10, net 45 days, and it always pays on Day 45. If you calculate that this policy effectively costs your firm $159,621 each year, what is the firm's average accounts payable balance? (Hint: Use the nominal cost of trade credit and carry its cost out to 6 decimal places.)

A) $1,234,000
B) $ 75,000
C) $ 157,500
D) $ 625,000
E) $ 750,000