Acch-past Question= MoM Factoring The finance director of Widnor Co has been looking to improve fife companys working capital management. Widnor Co has revenue from credit sales of $26,750,000 per year and although its terms of trade require all credit customers to settle outstanding involces within 40 days, on average customers have been taking longer. Approximately 1% of credili sales tum into bad debts which are not recovered. Trade recelvables currently stand at $4,458,000 and Widnor C has a cost of shortterm finance of 5% per year. The finance director is considering a proposal from a factoring company, Nolfe Co, which was invited to tender to manage the sales ledger of Widnor Co on a with-recourse basis, Nolfe Co believes that it can use its expertise to reduce average trade recelvables days to 35 days, whlle cutting bad debts by 70% and reducing administration costs by $50,000 per year. A condition of the factoring agreement is that the company would also advance Widnor C080% of the value of invoices ralsed at an interest rate of 7% per year. Nolfe CO would charge an annual fee of 0.75% of credit sales. Assume that there are 360 days in each year. Required: (a) Advise whether the factor's offer is financially acceptable to Widnor Co. (7 marks) (b) Briefly discuss how the creditworthiness of potential customers can be assessed