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Homework answers / question archive / 1)The management of Globe Travel (Pty) Ltd extracted the following information from the accounting records for the financial year ending 30 June 2020: Depreciation R25 000 Administration expenses R220 000 Sales R3 450 000 Sales expenses R180 000 Cost of goods sold R2 550 000 Lease expense R40 000 Interest expense R30 000 Dividends on preference shares R35 000 Dividend per ordinary share ROL50 Number of ordinary shares in issue 900 000 Tax rate 28% Required: Use the information provided to calculate the earnings per share (EPS) and the net profit margin Show all calculations
1)The management of Globe Travel (Pty) Ltd extracted the following information from the accounting records for the financial year ending 30 June 2020: Depreciation R25 000 Administration expenses R220 000 Sales R3 450 000 Sales expenses R180 000 Cost of goods sold R2 550 000 Lease expense R40 000 Interest expense R30 000 Dividends on preference shares R35 000 Dividend per ordinary share ROL50 Number of ordinary shares in issue 900 000 Tax rate 28% Required: Use the information provided to calculate the earnings per share (EPS) and the net profit margin Show all calculations.
2)Retirement Investment Advisors, Inc., has just offered you an annual interest rate of 47 percent until you retire in 40 years. You believe that interest rates will increase over the next year and you would be offered 5.3 percent per year one year from today. If you plan to deposit $14,500 into the account either this year or next year, how much more will you have when you retire if you wait one year to make your deposit? Multiple Choice $17.620.57
$25,697 24
$482515 524,526.95
$18.419.90
3)Retirement Investment Advisors, Inc., has just offered you an annual interest rate of 47 percent until you retire in 40 years. You believe that interest rates will increase over the next year and you would be offered 5.3 percent per year one year from today. If you plan to deposit $14,500 into the account either this year or next year, how much more will you have when you retire if you wait one year to make your deposit? Multiple Choice $17.620.57 $25,697 24 $482515 524,526.95 $18.419.90
1)
The Calculation of EPS and Net profit margin is given as-
Note 1.EPS= Earning atrributable to equity shares/ Number of equity shares outstanding
= (PAT-Preference dividend)/ Number of equity shares outstanding
2. Net profit margin = PAT/ Sales*100
| Sales | 3450000 | ||
| Less | COGS | 2550000 | |
| Gross profit | 900000 | ||
| Less | Adminstration Expenses | 220000 | |
| Less | Sales Expenses | 180000 | |
| Less | Lease expense | 40000 | |
| Less | Depreciation | 25000 | |
| EBIT | 435000 | ||
| Less | Interest | 30000 | |
| EBT | 405000 | ||
| Less | Tax | 113400 | (28% of EBT) |
| PAT | 291600 | ||
| Less | preferecne Shares dividend | 35000 | |
| Earning attributable to equity share holders | 256600 | ||
| Number of equity shares | 900000 | ||
| Earning per share= | |||
| Earning attributable to equity share holders/Number of equity shares | 0.285111 | per share | |
| Net profit margin = | |||
| PAT/Sale | 8.452% |
2)
| Future value = present value*(1+ rate)^time |
| Future value = 14500*(1+0.047)^40 |
| Future value = 91040.6 |
| Using Calculator: press buttons "2ND"+"FV" then assign |
| PV =-14500 |
| I/Y =4.7 |
| N =40 |
| PMT = 0 |
| CPT FV |
| Using Excel |
| =FV(rate,nper,pmt,pv,type) |
| =FV(0.047,40,,-14500,) |
| Future value = present value*(1+ rate)^time |
| Future value = 14500*(1+0.053)^39 |
| Future value = 108661.17 |
| Using Calculator: press buttons "2ND"+"FV" then assign |
| PV =-14500 |
| I/Y =5.3 |
| N =39 |
| PMT = 0 |
| CPT FV |
| Using Excel |
| =FV(rate,nper,pmt,pv,type) |
| =FV(0.053,39,,-14500,) |
Difference = 108661.17-91040.6 = 17620.57
3)
The future value of an investment can be obtained using the following formula :
Future value = Present value * (1+interest rate)^time period
When rate in 4.7%, investment is for 40 years and when rate is 5.3%, then investment is for 39 years.
Amount to be invested in 14,500.
Thus, if investment is made today, then the value at retirement after 40 years would be 14500*(1+0.047)^40 = $91,040.6331
When investment is made next year, then amount at retirement would be 14,500*(1+0.053)^39 = $108,661.195.
Thus, extra amount obtained at retirement if one year delay is there on investing will be 108,661.195-91,040.633 = $17,620.57.
Thus, option A $17620.57 is correct.
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