1.) Given the following items that vary directly with P1,000,000 sales for the year 2015:

Assets- 32.5%

Liabilities- 10%

Net profit margin is expected to be 6% and while payout ratio is constant at 30%.

If sales are expected to increase by 12.5% in 2016, how much is the additional financing needed?

1. P112,500

2. P52,500

3. P22,500

4. Some other amount

2.) ABC Company got a recent quote on a commercial bank loan of 16% discounted rate with a 20% compensating balance. The term of the loan is one year. What is the effective cost of borrowing?

a. 19.05%

b. 20.00%

c. 22.85%

d. 25.00%

Note: Please give a detailed solution, thank you! :3