Lengthen and go into more detail of this sentence as if one was answering a case study question

"The interest cost of the third alternative (factoring accounts receivable) is much lower than the second option. The bad debt losses should decrease (we assume to the industry's average of 1%) therefore the cost of option 3 would be 10.5% (12%prime rate + 2.5% premium - 4% bad debt losses.