QUESTION $3[35$ MARKS$]$

QWERTY Store$$s is a small business that sells a variety of cellphones and electronics. They have

been facing cash flow challenges and fear of default on payments at $3\%$ of the outstanding amounts,

as a result of tardy customers paying their bills, and need to make a decision regarding factoring their

accounts receivable. The owner is considering a factoring arrangement with ABC Factor, a factoring

company that will purchase their outstanding invoices at a discount.

Additional information regarding QWERTY Store$$s:

$$ Total outstanding accounts receivable: R$50,000$

$$ Average invoice amount: R$1,000$

$$ Average collection period $($Days Sales Outstanding$)$: $45$ days

$$ ABC Factor's recourse factoring offer: $90\%$ of the invoice amount will be paid immediately,

and the remaining $10\%$ will be paid when the customer settles the invoice. However, ABC

Factor will charge a factoring fee of $5\%$ on the total invoice amount and interest of $9\%$ p$.$a$.$

on the advances after deducting the commission.

$$ QWERTY Store$$s owner is contemplating whether factoring is a viable solution for their cash

flow issues.

$*$Assume $360$ days a year for calculation purpose.

Required:

a$)$ Determine the factoring fee and interest charged by ABC Factor for the entire outstanding

accounts receivable. $(06)$

b$)$ Calculate the total factoring amount QWERTY Store$$s will receive from ABC Factor if they decide

to go with the factoring arrangement. $(04)$c$)$ Calculate the total cost of factoring for QWERTY Store$$s if all customers settle their invoices. $(04)$

d$)$ Calculate the effective cost of factoring at an annualised rate, assuming a $360-$day year. $(06)$

e$)$ Analyze five $(5)$ advantages and disadvantages of factoring for QWERTY Store$$s considering

the impact on cash flow, customer relationships and overall business profitability that such a

decision will have. $(10)$

f$)$ Based on your analysis, provide a recommendation to QWERTY Store$$s owner on whether they

should proceed with the factoring arrangement or explore other alternatives to improve their cash

flow situation. $(05)$ please can you assist in detail with this question to make the answer easy to under and remember mark alloction to assist in the best way to answer to achieve all that marks and make it very academic $.$