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

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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

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

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

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