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Can you please help me calculate the pre tax profit for credit card for 2014 using the following Assumptions.
Request you to list the steps used.
Charges
Late fee £12 per occurrence
Over limit fee £10 per occurrence
Cash fees 3% of cash withdrawal value
Annual Fee £25 per account, per year
Interchange 1% of transaction value
KPIs
Accounts overdue 10% per month
Accounts over limit 15% per month
Average APR 30%
Balances revolving 90% of balance
Average balance £900 at end of 2013
Expected growth in average balance (2014) 10% per annum
Assumptions
Open accounts 200,000 at 2013 year-end
New accounts booked 5,000 per month
Annual operating cost £50 per open account
Cost of Acquisition £50 per account
Provision rate 9% of total balances
Annual cost of funds 4% by balance
Charge off
Unit charge-off rate in 2014 11% of accounts at 2013 year-end
Unit charge-off rate in 2014 0% of accounts booked in 2014
Post charge-off recoveries 20% of balance
Account Transactions
Monthly turnover 5% of total month end balances
Cash advances 20% of monthly turnover
Additional Assumptions
Please state any additional assumptions you have made to calculate your answer
Thanks in advance,
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