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mel-nik [20]
3 years ago
6

Assume that the amount that you have to actually borrow for your ski and bike rental business mentioned in the previous question

is $18,000. If it is still a one year loan and the bank will charge 4% discount interest and require a 10% compensating balance, then determine the effective annual interest rate that the bank is charging.
Business
1 answer:
s344n2d4d5 [400]3 years ago
3 0

Answer:

4.65%

Explanation:

Data provided in the question:

Amount borrowed = $18,000

Discount Interest rate = 4%  = 0.04

Required compensating balance = 10%

Now,

Effective loan rate on Discount Loan with compensating balance is given as

⇒ [ ( Interest rate ) ÷ (1- interest %-Compensating balance%) ] × 100%

⇒ [ 4% ÷ ( 1 - 4% - 10%) ] × 100%

⇒ [ 0.04 ÷ ( 1 - 0.04 - 0.10 ) ] × 100%

⇒ [ 0.04 ÷ 0.86 ] × 100%

⇒ 4.65%

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Marin Corporation had net sales of $2,427,500 and interest revenue of $40,000 during 2017. Expenses for 2017 were cost of goods
katovenus [111]

Answer:

The answer follows below;

Explanation:

Marin Corporation

Income Statement

For the year 31, xxxx 2017

Sales                              $2,427,500

Cost of Goods Sold     ($1,465,500)

Gross Profit                                                $962,000

Operating Expenses

Admin. Expenses          ($220,600)

Selling Expenses          ($289,300)

Interest Expense            ($47,900)

Total Operating Expenses                        ($557,800)

Operating Income                                        $404,200              

Non Operating Income

Interest Income                                             $40,000          

Total Income before Taxation                    $444,200

Taxes (444,200*30%)                                   ($133,260)      

Net Income after Taxation                            $310,940          

6 0
3 years ago
Read 2 more answers
An investment has the following cash flows and a required return of 13 percent. Based on IRR, should this project be accepted? W
Ganezh [65]

Answer:

 B. No; The IRR is less than the required return by about 1.53 percent

Explanation:

The internal rate of return is the discount rate that equates the after tax cash flows from an investment to the amount invested.

The IRR can be calculated using a financial calculator:

Cash flow in year zero = -$42,000

Cash flow in year one = 15,300

Cash flow in year two = 28,400

Cash flow in year three = 7,500 

IRR = 11.47%

A project should be chosen if the IRR is greater than the required return

The IRR is less than the required return so the project should be rejected.

To find the IRR using a financial calacutor:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. After inputting all the cash flows, press the IRR button and then press the compute button.

I hope my answer helps you

6 0
3 years ago
Jamie would like to identify the similarities and differences among seven different types of flowers. Jamie should use a Venn di
AlexFokin [52]
False. A Venn diagram only works to compare 2 things. <span />
4 0
3 years ago
Read 2 more answers
The aims of mercantilists do not include
fomenos

Answer:

B) achieving political and economic unity

Explanation:

The goals of mercantilism were to increase the wealth of the government (accumulate gold and silver) by controlling economic affairs, and ultimately increasing the power of the nation (both economic and military). You must remember that mercantilism was popular during the 17th and 18th century when democracy didn't exist, and the Kings and Queens were eager to increase their personal wealth, power and greatness.

4 0
3 years ago
A given investment project will cost RM400,000. Incremental annual cash flows after taxes are expected to be RM80,000 per year f
erastova [34]

Answer:

Based on the profitability index method, the investment should not be accepted.

It does not produce enough cash flows to justify the investment.

Explanation:

The profitability index method measures the present value of benefits for by dividing the present value of benefits by the present of initial investments.

The present value of initial investment in this project remains RM400,000.  The present value of incremental annual cash flows of RM80,000 after taxes for 5 years will be equal to:

RM80,000 * 3.668 = RM293,440

Then the next step is to divide the present value of benefits by the initial investment as follows:

RM293,440/RM400,000 = 0.7336 = 73.36%

The implication is that the present value of the benefits is less than the initial investment costs.  The project should then be rejected.

6 0
3 years ago
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