Paco, Inc. is considering obtaining funding through advances against receivables. The total annual credit sales are $1,200,000, the terms are net/30 days, and the payment is made on the average of 30 days. Bonifacio Commercial Banking Corporation (BCBC) will advance funds under a pledging arrangement for 12% annual interest. On average, 75% of credit sales will be accepted as collateral. BA Finance offers factoring on a non-recourse basis for a 2% factoring commission, charging 1% will per month on advances and requiring a 20% factor's reserve. Under this plan, the company factor in all accounts and close its credit and collections department, saving P12,000 per year. a. What are the effective interest rate and the average amount of funds available under pledging and under factoring? Answer: b. Which plan do you recommend? Answer: