Department of Finance and Economics Credit Analysis and Lending Management (0308461) Assignment 1 (Due date: 01-02-2023) Exercise 1.- Sharjah Book shop Company sells books. The average selling price for a book is 230 AED. The company Fixed costs of 100,000 AED per year and a variable cost of 120 AED per book. Sharjah Book shop Company submitted last week a loan application to Sharjah Islamic Bank. Loan amount is equal to 200,000 Aed payable over 5 years. Each year the company would pay back 56,000 Aed as annual instalment (including principal and interest). Moreover, the depreciation of the company assets per year is equal to 10,000 Aed. Questions: 1- Calculate the cash breakeven point of Sharjah Book shop Company. 2- As a lending officer in Sharjah Islamic Bank, would you accept the loan if the minimum acceptable cash breakeven point in the bookshop industry is 20,000 Aed? Answers: Exercise 2.- Salem is willing to invest in van worth $9,000 to do transportation. If the cash inflows of a van are expected to be $3,000 annually forfour years [Horizon of investment). Its annual depreciation expense will be $9,000/4 = $2,250 and its annual cash expenses = $500. 1- Calculate the ARR for the Van business. 2- As a lending officer in Sharjah Islamic Bank, would you accept the loan application if the minimum acceptable ARR ofthe Van business is 7%? Answers: Page 1 of4