AAFM Exam CWM_LEVEL_2 Topic 3 Question 45 Discussion

Section C (4 Mark)

Read the senario and answer to the question.

Raman's company has made plans for the next year for a new project. It is estimated that the company will employ total assets of Rs. 900 lakh, 75% of the assets being financed by borrowed capital at an interest cost of 6% per year. The direct costs are estimated at Rs. 530 lakh. All other operating expenses are estimated at Rs. 95 lakh. The goods will be sold to customers at 150% of the direct costs. Income tax rate is assumed to be 30%. Calculate net profit margin and return on owners' equity.