Answer:
18.29%
Explanation:
Return on Equity is the net profit available for equity/ Total equity value.
Total equity = Total assets - Total debt
= $90 million - $55 million = $35 million
Earnings for equity = Annual sales net profit margin 4%
= $160 million 4% = 6.4 million
Therefore, return on equity =
=
Therefore, ROE = 18.29%
The greatest interest rate that John can accept and meet the criteria is 12.25% compounded monthly
The monthly payment formula for a loan:
Where PV is the principal value of the loan,
r is the rate per month,
n is the number of months,
Here, PV = $ 4,500, n = 36,
Let r be the annual rate of interest,
P ≤ 150
Thus, the greatest annual interest rate = 0.1225 = 12.25 %
Therefore, Option C is correct.
To know more about the monthly payments and interest rate, refer to the link below: