29.Cleaners,Inc.is
considering purchasing equipment costing$60,000 with a 6-year useful life.The
equipment will provide cost savings of14,600 and will be depreciated
straight-line over its useful life with no salvage value.Cleaners requires a
10% rate of return
Presents Value of an
Annuity of 1
Period 8% 9% 10% 11% 12%
13%
6 4.623 4.486 4.355
4.231 4.111 3.784
29-1.What is the
approximate net present value of this investment?
a.27,600
b.3,583
c.1,772
d.5,496
29-2.What is the
approximate profitability index associated with this equipment?
a.1.23
b.1.03
c.1.06
d.0.73
29-3.What is the approximate
internal rate of return for this investment?
a.9%
b.10%
c.11%
d.12%
30.Present Value of an
Annuity of 1
Periods 8% 9% 10%
1 .926 .917 .909
2 1.783 1.759 1.736
3 2.577 2.531 2.487
30-1.A company has a
minimum required rate of return of 10%.It is considering investing in a project
that costs$50,000 and is expected to generate cash inflows of 25,000 at the end
of each year for three years.The profitability index for this project is
a.0.80
b.1.00
c.1.24
d.1.27
30-2.A company has a
minimum required rate of return of 8%.It is considering investing in a preojcet
that costs$91,116 and is expected to generate cash inflows of 36,000 each year
for three years.The approximate internal rate of return on this project is
a.8%
b.9%
c.10%
d.less than the required
8%
33.Dino Company reported
net income of 72,000 for the year.During the year, accounts receivable
increased by7,000, accounts payable decreased by 3,000 and depreciation expense
of 5,000 was recorded.Net cash porvided by operating activities for the year is
a.67,000
b.87,000
c.71,000
d.72,000
34.Fare Company reported
a net loss of 31,000 for the year ended Dec.31,2013.During the year,accounts
receivable decreased 15,000, merchandiseinventory increased 24,000,accounts
payable increased by 30,000, and depreciation expense of 15,000 was
recorded.During 2013,operating activities
a.used net cash of 5,000
b.used net cash of
23,000
c.provided net cash
of5,000
d.provided net cash of
23,000
35.Using the indirect
method,patent amortization expense for the period
a.is deducted from net
income
b.causes cash to
increase
c.cuases cash to
decrease
d.is added to net income
36.In developing the
cash flows from operating activities,most companies in the U.S
a.use the direct method
b.use the indirect
method
c.present both the
indirect and direct methods in their financial reports
d.prepare the operating
activities section on the accrual basis
37.Each of the following
is added to net income in computing net cash provided by operating activities
except
a.amortization expense
b.an increase in accrued
expeneses payable
c.a gain on sale of
equipment
d.a decrease in
inventory
38.Which of the
following would be subtracted from net income using the indirect method?
a.Depreciation expense
b.An increase in
accounts receivable
c.An increase in
accounts payable
d.A decrease in prepaid
expenses
39.Which of the
following would be added to net income using the indirect method?
a.An increase in
accounts receivable
b.An increase in prepaid
expenses
c.Depreciation expense
d.A decrease in accounts
payable
40.which of the
following whould not be an adjustment to net income using the indirect method?
a.Depreciation expense
b.An increase in prepaid
Insurance
c.Amortization expense
d.an increase in land
41.In calculating cash
flows from operating activities using the indirect method, a loss on the sale
of equipment will appear as a(n)
a.subtraction from net
income
b.addition to net income
c.addition to cash flow
from investing activities
d.subtraction from cash
flow from investing activities
42.The following
information pertains to Eura Company.
Assets
Cash and short-term
investments ()for Q.42-1->(40,000) Q.42.2->40,000
Accounts
receivable(net)(30,000) 30,000
Inventory (45,000)
25,000
Property,plant and equipment
(215,000) 215,000
Total (330,000) 310,000
Liabilities and
Stockholders’ Equity
Current liabilities
(60,000) 60,000
Long-term liabilities
(75,000) 75,000
Stockholders
equity-common (195,000) 175,000
Total Liabilities and
Stockholder’s Equity (330,000) 310,000
Income Statement
Sales (90,000) 90,000
Cost of goods sold
(45,000) 45,000
Gross profit (45,000)
45,000
Operating expenses
(30,000) 25,000
Net income (15,000)
20,000
Number of shares of
common stock (5,000) 5,000
Market price of common
stock (22) 22
Dividends per share
(1.00) 1.00
42-1.What is the return
on common stockholders’ equity for Eura?
a.4.8%
b.7.7
c.23.1
d.46.2
42-2.What is the
price-earnings ratio for Eura?
a.5times
b.4.0
c.7.3