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Business Finance Ch. 7 Homework Solutions

# Business Finance Ch. 7 Homework Solutions - Profit margin...

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February 25, 2008 Profit margin is net income/sales. 30% dividend is 30% of net income. Fixed assets and other assets are determined at the long term rate. February 27, 2008 300,000 sales .10 profit margin 30,000 net income 9,000 dividends (30%) 21,000 inc. in RE 60,000 inc. in assets 21,000 inc. in RE 39,000 external funds needed a. If rates are constant:  200,000 borrowed x 12% per annum x 3 years = 72,000 interest costs (long term) 200,000 borrowed x 10% “””” =60,000 interest costs (short term) 72,000-60,000 = 12,000 interest savings borrowing short term b. If short term rates change 1 yr.  200,000 x. 10 = 20,000 2 yr  2000,000 x. 15 = 30,000 3yr  200,000 x .18 = 36,000

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1,500,000 2,000,000 3,500,000 1,000,000 960,000 535,000 425,000 170,000 255,000 Ch. 7 1. 10,000 initial amt +70,000 deposits -25,000 checks 55,000 balance 15,000 float Based on the 40,000 balance on the books and the 55,000 balance in the banks
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Business Finance Ch. 7 Homework Solutions - Profit margin...

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