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Q2. Which type of bank loans generally has the highest effective rate of interest?
Q3. Nanyang Ltd produces a single product. The selling price is 50 per unit and the variable
cost is 30 per unit. The annual fixed cost of the business is 4,000. The company aims to
make 10,000 profit during the forthcoming year. How many units must be sold to achieve
this target?
A. 200
B. 280
C. 500
D. 700 (Answer)
Question:
Answer:
Part-A
ROE = Profit Margin (Profit/Sales) x Total Asset Turnover (Sales/Assets) x Equity Multiplier
(Assets/Equity)
=0.054 x 1.097 x 3.12= 0.184 = 18.4%
Question:
The Mayo company has a capital budget of Rs 2,000 with an opportunity to invest it in five
different projects. The initial investment and PV of Cash Flows are described below.
Answer:
Part-A
Part-B
All of the projects are profitable, but with a capital budget of only Rs 2,000, Mayo
Company should choose Projects G, H, and J that have a combined NPV of Rs 820.