PART A:

Bell Brothers has $3,000,000 in sales. Its fixed costs are estimated to be $100,000, and its variable costs are equal to fifty cents for every dollar of sales. The company has $1,000,000 in debt outstanding at a before-tax cost of 10 percent. If Bell Brothers' sales were to increase by 20 percent, how much of a percentage increase would you expect in the company's net income? Choose the correct choice.

	a.	19.24%
	b.	23.08%
	c.	21.50%
	d.	18.33%
	e.	15.66%

PART B:

Suppose you borrow $2,000 from a bank for one year at a stated annual interest rate of 14 percent, with interest prepaid (a discounted loan). Also assume that the bank requires you to maintain a compensating balance equal to 20 percent of the initial loan value. What effective annual interest rate are you being charged? Choose the correct choice.

	a.	8.57%
	b.	28.00%
	c.	14.00%
	d.	16.28%
	e.	21.21%