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Parvez A.
Financial Analyst (Royal bank of Scotland)
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Economics
TutorMe
Question:

Axl will be borrowing $150,000 today to buy a house, and he will pay it back with 20 yearly payments starting one year from today. If the effective annual interest rate is 9%, how much will the final payment be if the annual payments are constant?

Parvez A.
Answer:

If the loan amount is P, rate on interest (monthly is r, and loan term is n the EMI will be EMI= P*r[(1 +r)^n]/ [(1+ r)^n- 1] P = Loan amount r = interest rate n = loan term = 150000*0.09[(1 +0.09)^20]/ [(1+ 0.09)^20- 1] = 13500[(1.09)^20]/ [(1.09)^20- 1] = 13500[5.6]/ [5.6044107677783- 1] = 13500[5.6]/ [4.6044107677783] = 13500[1.21622511162315] = 16419.04 So EMI will be $16419.04

Finance
TutorMe
Question:

Once Bitten Corp. uses no debt. The weighted average cost of capital is 9.8 percent. The current market value of the equity is $29 million and the corporate tax rate is 35 percent.What is EBIT?

Parvez A.
Answer:

Value of the firm = EBIT (1 – Tax rate)/ Cost of capital Equity + debt = EBIT (1 – Tax rate)/ Cost of capital 29,000,000 + 0 = EBIT (1 - .35)/ 0.098 29,000,000 = EBIT* 0.65/0.098 2842000 = EBIT* 0.65 EBIT = 2842000/0.65 = $4372307.7

Accounting
TutorMe
Question:

Kelvin Co. produces and sells socks. Variable costs are budgeted at $4 per pair, and fixed costs for the year are expected to total $90,000. The selling price is expected to be $6 per pair. The sales dollars required to make an after-tax profit (πA) for Kelvin Co. of $15,000, given an income tax rate of 40%, are calculated to be

Parvez A.
Answer:

Target income volume = [Fixed costs + (Target after-tax income/(1-tax rate)]/Unit CM Fixed cost = 90000 Unit Contribution margin = sale price – variable cost = 6- 4 = 2 Tax rate = 40 % Target profit = 15000 Let’s put all the values in the formula Target income volume = [90000+ (15000/(1-0.4))]/2 = [90000 + (15000/.6)]/2 = [90000 + 25000]/2 = 115000/2 = 57500 Units The correct answer is 57500 Units

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