Cleaners,Inc.is considering purchasing equipment
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?
29-2.What is the approximate profitability index associated with this equipment?
29-3.What is the approximate internal rate of return for this investment?
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
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
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
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
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?
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
d.A decrease in accounts payable
40.which of the following whould not be an adjustment to net income using the indirect method?
b.An increase in prepaid Insurance
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.
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
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?
42-2.What is the price-earnings ratio for Eura?