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 :   

ASSETS

Dec. 2015 Dec. 2014

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

Dec. 2015 Dec. 2014

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

Dec. 2015 Dec. 2014

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   

OPERATING INCOME

Dec. 2015 Dec. 2014

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

  Dec. 2015 Dec. 2014

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

Dec. 2015 Dec. 2014

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

Required: Perform the necessary adjustments

operating income

unadjusted operating income

inflation adjustment

subsidized cost of funds adjustment

in kind donations adjustment
(market value of goods and services donated )

in cash donation adjustment
(value of the donation)

adjusted operating expenses

(total of the adjustments 2,3,4,5,6)

adjusted operating profit (loss)

(adjusted operating expenses – operating income)

and calculate the OSS and FSS for the MFI Sano. Interpret the result. [Note: you should show the formula and every step of your calculation]