Study the information provided below and answer the following questions. INFORMATION The management of SKB Inc. is considering making the following changes in working capital management: Inventory management It has been suggested that the order size for Product KN# 5 should be determined using the economic order quantity model (EOQ). SKB Inc. forecasts that demand for Product KN#5 will be 160 000 units in the coming year and it has traditionally ordered 10% of annual demand per order. The ordering cost is expected to be R400 per order. Direct Inventory Holding (DIH) costs are R5 per unit and insurance on Product KN# 5 amounts to 2% of the DIH costs per unit per year. The current after-tax cost associated with return on capital is approximately 2 cents per unit per year. Factoring The management of SKB Inc. is considering factoring its accounts receivable to gain access to cash for its daily operations. SKB's annual credit sales amount to R52m. Currently, the average collection period of the firm is 60 days. A factoring company has offered the following terms in a servicing and factor-financing agreement: Service fees will be charged at 2% of total credit sales of SKB, and 60% on each credit invoice will be paid immediately and interest will be charged at 2% above the current prime rate of 9%. Currently, some suppliers of SKB Inc. offer discounts of 5% for early settlement. The transactions for which the discounts apply are equivalent to approximately 30% of SKB's credit sales. If the factor administers the accounts receivable, it is expected that there would be administration cost savings of R250 000 per annum. REQUIRED: 5.1. Calculate the economic order quantity for Product KN#5 5.2. Calculate the cost of the current ordering policy and the change in the costs of inventory management that will arise if the economic order quantity is used to determine the optimum order size for Product KN#5. 5.3. Calculate the net cost of the factoring. 5.4. Discuss TWO (2) advantages and TWO (2) disadvantages of factoring that the management of SKB Inc. should consider before agreeing to factor the accounts receivable.