1. The previous statement for your credit card had a balance of $770. You make a payment of $290 but you made additional purchases of $160. The card carries an APR of 22%. What is the finance charge for this month? (Round your answer to the nearest cent.)
2. Working Capital Policy
Payne Products had $1.6 million in sales revenues in the most recent year and expects sales growth to be 25% this year. Payne would like to determine the effect of various current assets policies on its financial performance. Payne has $1 million of fixed assets and intends to keep its debt ratio at its historical level of 45%. Payne's debt interest rate is currently 9%. You are to evaluate three different current asset policies: (1) a tight policy in which current assets are 45% of projected sales, (2) a moderate policy with 50% of sales tied up in current assets, and (3) a relaxed policy requiring current assets of 60% of sales. Earnings before interest and taxes is expected to be 11% of sales. Payne's tax rate is 40%.
What is the expected return on equity under each current asset level? Round your answers to two decimal places.
Tight policy %
Moderate policy %
Relaxed policy %