Factor Limited is a trading company. Its annual turnover is ₹ 6,000 lakh out of which ₹ 4,200 lakh is on credit. Its average collection period is 90 days and presently its receivable collection cost is ₹ 60 lakh p.a. The

Factor Limited is a trading company. Its annual turnover is ₹ 6,000 lakh out of which ₹ 4,200 lakh is on credit. Its average collection period is 90 days and presently its receivable collection cost is ₹ 60 lakh p.a. The company needs immediate funds to finance its growth projects and it has an option to take short-term loans at interest rate of 15% p.a. Recently, one of the factoring companies visited the Chief Executive of Factor Limited and offered him to provide the factoring services on recourse basis. As per terms of factoring arrangement, factoring company will provide for an advance payment of 85% of the value of factored receivable, maintaining factor reserve of 15%. The advance will carry a rate of interest of 12% per annum. In addition to interest, factoring company will charge factoring commission @ 2.5% of the value of factored receivables. Both the interest and commission shall be collected by factoring company on upfront basis.As the Company Secretary of Factor Limited, you have been requested to prepare a report that calculates the net annual cost of funding through the factoring of receivables, assuming 360 days in a year.