Question 3 Bell plc (Bell) is a UK company that imports toys from China, which it then sells to wholesale customers throughout the UK. Annual sales revenue is 19 million, with all sales being credit sales to its wholesale customers. Bell's customers take 70 days to pay and the company spends 175,000 per year in order to collect these debts. Bad debts are 110,000 per year. Bell operates with a significant overdraft on which it pays interest at 14% per year. In order to reduce its interest costs, Bellis considering adopting one of the following two proposals in relation to its debtors: Proposal 1 Introduce a discount of 1.5% for payments made within 30 days. Bell expects 70% of its customers to take up the offer and pay on the 30th day. The rest will continue to take 70 days to pay. This proposal is expected to reduce Bell's debt collection costs to 115,000 per year and to reduce bad debts to 70,000 per year. Proposal 2 Employ a factor for a fee of 2% of the total credit sales value. The factor will advance immediately, on the day of sale, 80% of the trade receivables at an interest rate of 16% per year. Employing a factor will reduce the average collection period for all credit sales to 20 days. This proposal is expected to reduce Bell's debt collection costs to 25,000 per year and to reduce bad debts to 30,000 per year. Required Undertake a cost-benefit analysis of both proposals and recommend which proposal Bell should proceed with, if any. You are to assume that there are 365 days in a year and all figures are to be shown to the nearest whole 1. (25 marks)