An organization has just started exporting goods to a new client in country Zee, a territory theorganization if not familiar with. What are the advantages to an organisation of using a debt$-$factoring agency to collect their debts in country Zee? $(5$ marks$)$b$)$ Staveley Electronics Ltd has an annual turnover of $25$ million of which $0\mathrm{.}2$ million prove to bebad debts. Credit controls within the business have been weak in recent years and the averagesettlement period for its trade debtors is currently $70$ days. All sales are on credit and turnoverhas been stable in recent years. The business has been approached by a debt$-$factoring businesswhich has offered to provide an advance equivalent to $80\%$ of its debtors $($based on an averagesettlement period of $30$ days$)$ at an annual interest charge of $14\%.$ The factor will takeresponsibility for the collection of credit sales and will charge a fee of $2\mathrm{.}5\%$ of sales turnover forthis service.The use of a factoring service is expected to lead to cost savings in credit administration of$120,000$ per annum and will reduce bad debts by half. The settlement period for debtors will bereduced to an average of $30$ days which is in line with the industry norm. The business currentlyhas an overdraft of $6\mathrm{.}2$ million and pays interest at the annual rate of $15\%.$Required:Calculate the net annual cost or savings resulting from a decision to employ the services of afactor. $(10$ marks$)($Total $15$ marks$)$