Phibe-Evelyn ltd. has annual credit sales of GH2,000,000. Credit customers take 90 days to pay. Bad debts are 4% of sales. The company finances its trade receivables with a bank overdraft, on which interest is payable at an annual rate of 30%. A factor has offered to take over administration of the receivable's ledger and collections for a fee of 5% of the credit sales. This will be a non-recourse factoring service. It has also guaranteed to reduce the payment period to 60 days. It will provide finance for 80% of the trade receivables, at an interest cost of 16% per year. Phibe-Evelyn ltd. estimates that by using the factor, it will save administration costs of GH16,000 per year. Required: What would be the effect on annual profits if Phibe-Evelyn ltd. decides to use the factor's services? (Assume a 365-day year)