Question 1 You are given the following information: Somewhere Berhad Income Statement For Year Ended 31 December 2019 RM Sales 1200 Cost of goods sold 700 Gross profit 500 Operating expenses 250 Earnings Before Interest and Taxes 250 Interest expenses 50 Earnings Before Taxes 200 Taxes (30%) 60 Net income 140 From the above information you are required to answer the questions below. a. Compute: i. Gross Profit Margin ii. Operating Profit Margin iii. Net Profit Margin (4 Marks) b. Using your own words, what do you understand the difference between gross profit margin, operating profit margin, and net profit margin? (3 Marks) C. Based on your calculation in part (a), analyse Somewhere Berhad performance to the following industry average ratios: Gross Profit Margin 35% Operating Profit Margin 30% Net Profit Margin 25% (3 Marks) (Total: 10 Marks) Question 2 Imagine that today is January 1,2017. The rate of inflation is expected to be 4% throughout 2017. However, increased government deficits and renewed vigor in the economy are then expected to push inflation rates higher. Investors expect the inflation rate to be 5% in 2018, 6% in 2019, and 7% in 2020. The real risk-free rate, k* is expected to remain at 2% over the next 5 years. Assume that no maturity risk premiums are required on these bonds. From the above information you are required to: a. Compute the interest rate for a one-, two-, three-, four-, and five-year bond. (5 marks) b. If inflation is expected to equal 9% every year after 2020, what should be the interest rate for a 10- and 20-year bond? (2 marks) C. Plot the yield curve for the interest rates you computed in part [a] and [b]. (1 mark) d. Based on the curve (in part c), what would you do if you are the borrower? Are going to borrow more? Or less? Explain your answer. (2 marks) (Total: 10 marks)