1. Thinking 2. Imagining 3. Writing it down
Most probably B. What does Unc mean in question A?
<u>Calculation of Increase in Leverage ratio to achieve 20% ROE:</u>
The current ROE is given 15% and operating profit margin and asset turnover ratio are 8% and 1.25, respectively.
The formula for ROE is as follows:
ROE = Operating profit margin * Asset turnover ratio * Leverage ratio
We can say that :
Leverage ratio = ROE / (Operating profit margin * Asset turnover ratio)
Hence Current Leverage Ratio = 15% / (8%*1.25) = 1.5 times
Now we are asked to get ROE 20% with operating profit margin and asset turnover ratio at 8% and 1.25, respectively.
Hence,
Required Leverage Ratio = 20% / (8%*1.25) = 2 times
Hence Leverage Ratio should Increase by (2-1.5)<u> 0.5 times</u> to get the ROE of 20%
Answer:
<em>Maximum Interest rate R≈0.06167 ≈0.6167 % </em>
Explanation:
Answer:
Explanation:
Let: P be the loan amount(P=$100000), R be rate(R=?), I be interest after 10yrs(I=?), T to be time to repay (t=10yrs 12=12months: <em>since a certain amount is set up on a monthly bases for the purpose of payment, we assume a monthly rate</em>)
To get the interest I paid at the end of 10yrs, do the following:
let total lump sum repayable be TL
∵TL=$1450x12monthsx10yrs=$174000
Hence,
I=$174000-$100000=$74000
Using R=
where I=$74000, P=$100000 and T=10*12=120months
R==0.006167
R≈0.006167
multiplying R by 100, we have R in percentage as,
<em><u>R≈0.6167 % Interest rate</u></em>
Answer:
$3.2 million
Explanation:
The revenue and gross profit or loss which the company identify in the first and second year if it recognizes revenue upon contract completion is calculated below.
Total costs = Incurred costs + estimated costs to complete = $8 million + $12 million = $20 million
Revenue to recognize = $8m/$20m*$28m = $11.2 million
Gross Profit = Revenue recognized less costs incurred
= $11.2m - $8m = $3.2 million