A company has annual sales of 5.4 million and a 10% cost of capital. 70% of these sales are on credit and the remainder are cash sales. The company is considering whether to avail of a factoring service to improve its management of debtors. It has estimated that if debtor management is entirely outsourced to the factor, the level of trade receivables will decrease by 800,000. The factor will charge a fee of 2% of any sales it takes over from the company. What is the net annual effect on the profit and loss account if the company outsources debtor management to the factor? Net benefit of 4,400 Net cost of 108,000 Net cost of 75,600 Net cost of 28,000