Question

Question 1: (20 Marks)

 

In addition to the below balance sheet and income statement you are given the following information about MFI Sano.

 

Expected Inflation	2.8%
The market rate for commercial loans is	12.0%
The actual interest rate paid for subsidized   loans is	4.0%
In-kind donations adjustments	$400,000
In-cash donations adjustments	$250,000

 

The table below reports the income statement and balance sheet of MFI Sano for 2014 and 2015:

 

Balance Sheet
	Dec. 2015	Dec. 2014
ASSETS
Cash	28,000	29,000
Investments	83,000	95,000
Total loan portfolio	832,000	625,000
(Loan loss reserve)	(55,000)	(50,000)
Total net loans outstanding	777,000	575,000
Fixed assets	32,800	25,800
(Accumulated depreciation)	(10,500)	(9,000)
Net fixed assets	22,300	16,800
TOTAL ASSETS	910,300	715,800
LIABILITIES
Forced savings	95,000	100,000
Commercial loans	18,900	14,800
Subsidized loans	48,500	29,500
TOTAL LIABILITIES	162,400	144,300
EQUITY
Donated equity cumulated	448,000	410,000
Donated equity current	0	50,000
Cumulated earnings/losses	95,900	(40,000)
Current earnings/losses	204,000	151,500
TOTAL EQUITY	747,900	571,500
TOTAL LIABILITIES + EQUITY	910,300	715,800

Income   Statement
	Dec. 2015	Dec. 2014
OPERATING INCOME
Interests and fees from loans	410,800	395,000
Income from investments	32,000	31,000
TOTAL OPERATING INCOME	442,800	426,000
OPERATING EXPENSES
Interest and fee expenses	2,450	2,150
Loan loss provision expense	36,200	25,200
Salaries	251,125	168,000
Other administrative expenses	38,000	42,000
Depreciation	2,800	1,900
TOTAL OPERATING EXPENSES	330,575	239,250
NET OPERATING PROFIT / LOSS	112,225	186,750
NON OPERATING INCOME
Cash donations	0	60,000
Other non-operating income	0	0
TOTAL NON OPERATING INCOME	0	60,000
Non-operating expenses	0	0
TOTAL PROFIT / LOSS	112,225	246,750