a) Pavan Limited has made plans for the year 2022-23. It is estimated thatthe Company will employ total assets of 25,00,000; 30% of assetsbeing financed by debt at an interest cost of 9%p.a. The direct cost forthe year are estimated at 15,00,000 and all other operating expensesare estimated at 2,40,000. The sales revenue is estimated at22,50,000. Tax rate is assumed to be 50%. Required to calculate: (i)Net profit margin (ii)Return on assets

Net profit margin and Return on assets are two profitability ratios being used in business. Net…

Answered: a) Pavan Limited has made plans for the…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Five Star is considering leasing a building and buying the necessary equipment to operate a public warehouse. Alternatively, the company could use the funds to invest in $149,600 of 5% U.S. Treasury bonds that mature in 16 years. The bonds could be purchased at face value. The following data have been assembled: Cost of equipment Life of equipment Estimated residual value of equipment Yearly costs to operate the warehouse, excluding depreciation of equipment Yearly expected revenues-years 1-8 Yearly expected revenues-years 9-16 Required: Differential revenue from alternatives: Revenue from operating warehouse Revenue from investment in bonds Differential revenue from operating warehouse 1. Prepare a differential analysis report of the proposed operation of the warehouse for the 16 years as compared with present conditions. Five Star Proposal to Operate Warehouse. Differential cost of alternatives: Costs to operate warehouse ✓ $149,600 16 years $27,500 Cost of equipment less residual…
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