Account Tutor – Payment
Account Tutor – Payment
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Shields Company has gathered the following data on a proposed investment project: (Ignore income taxes in this problem.)
Investment required in equipment | $680,000 |
Annual cash inflows | $66,000 |
Salvage value | $0 |
Life of the investment | 20 years |
Required rate of return | 7% |
The company uses straight-line depreciation. Assume cash flows occur uniformly throughout a year except for the initial investment.
The payback period for the investment is closest to: |
0.1 years | |
1.0 years | |
8.3 years | |
10.3 years |
(Ignore income taxes in this problem.) The management of Helberg Corporation is considering a project that would require an investment of $291,000 and would last for 6 years. The annual net operating income from the project would be $139,000, which includes depreciation of $18,000. The scrap value of the project’s assets at the end of the project would be $19,900. The cash inflows occur evenly throughout the year. The payback period of the project is closest to:
1.9 years | |
2.1 years | |
1.6 years | |
1.8 years |
The management of Londo Corporation is investigating buying a small used aircraft to use in making airborne inspections of its above-ground pipelines. The aircraft would have a useful life of 6 years. The company uses a discount rate of 20% in its capital budgeting. The net present value of the investment, excluding the intangible benefits, is −$474,840. (Ignore income taxes in this problem)
How large would the annual intangible benefit have to be to make the investment in the aircraft financially attractive? (Round discount factor(s) to 3 decimal places and final answer to the nearest dollar amount.)
$474,840 | |
$142,766 | |
$79,140 | |
$94,968 |
The management of Urbine Corporation is considering the purchase of a machine that would cost $410,000 would last for 7 years, and would have no salvage value. The machine would reduce labor and other costs by $67,000 per year. The company requires a minimum pretax return of 7% on all investment projects. (Ignore income taxes in this problem.)
The net present value of the proposed project is closest to: (Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount.)
−$48,937 | |
−$8,937 | |
−$73,857 | |
−$24,017 |
(Ignore income taxes in this problem.) The management of Stanforth Corporation is investigating automating a process. Old equipment, with a current salvage value of $12,000, would be replaced by a new machine. The new machine would be purchased for $402,000 and would have a 6 year useful life and no salvage value. By automating the process, the company would save $139,000 per year in cash operating costs. The simple rate of return on the investment is closest to:
18.5% | |
17.9% | |
34.6% | |
16.7% |
(Ignore income taxes in this problem.) Dube Corporation is considering the following three investment projects: |
Project D | Project E | Project F | |
Investment required | $12,400 | $55,000 | $100,000 |
Present value of cash inflows | $14,830 | $78,950 | $117,160 |
The profitability index of investment project E is closest to:
0.44 | |
1.44 | |
0.56 | |
0.30 |
(Ignore income taxes in this problem.) Buy-Rite Pharmacy has purchased a small auto for delivering prescriptions. The auto was purchased for $31,000 and will have a 6-year useful life and a $4,300 salvage value. Delivering prescriptions (which the pharmacy has never done before) should increase gross revenues by at least $32,300 per year. The cost of these prescriptions to the pharmacy will be about $25,600 per year. The pharmacy depreciates all assets using the straight-line method. The payback period for the auto is closest to:
4.6 years | |
4 years | |
5.3 years | |
3.8 years |
(Ignore income taxes in this problem.) Neighbors Corporation is considering a project that would require an investment of $324,000 and would last for 8 years. The incremental annual revenues and expenses generated by the project during those 8 years would be as follows: |
Sales | $200,000 |
Variable expenses | 27,000 |
Contribution margin | 173,000 |
Fixed expenses: | |
Salaries | 34,000 |
Rents | 47,000 |
Depreciation | 42,000 |
Total fixed expenses | 123,000 |
Net operating income | $50,000 |
The scrap value of the project’s assets at the end of the project would be $24,000. The cash inflows occur evenly throughout the year. The payback period of the project is closest to
3.5 years | |
6.5 years | |
5.0 years | |
3.3 years |
Blaine Corporation is considering replacing a technologically obsolete machine with a new state-of-the-art numerically controlled machine. The new machine would cost $200,000 and would have a sixteen-year useful life. Unfortunately, the new machine would have no salvage value. The new machine would cost $30,000 per year to operate and maintain, but would save $62,000 per year in labor and other costs. The old machine can be sold now for scrap for $20,000. The simple rate of return on the new machine is closest to: (Ignore income taxes in this problem.)
9.75% | |
31.00% | |
21.67% | |
10.83% |
(Ignore income taxes in this problem.) The Zinger Corporation is considering an investment that has the following data: |
Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
Investment | $12,000 | $3,800 | |||
Cash inflow | $2,800 | $2,800 | $8,700 | $4,800 | $4,800 |
Cash inflows occur evenly throughout the year. The payback period for this investment is: (Round your answer to 1 decimal place)
3 years | |
3.3 years | |
4 years | |
4.3 years |
(Ignore income taxes in this problem.) Assume you can invest money at a 14% rate of return. How much money must be invested now in order to be able to withdraw $5,000 from this investment at the end of each year for 8 years, the first withdrawal occurring one year from now?
$24,840 | |
$23,195 | |
$21,440 | |
$1,755 |
The present value of a cash flow will never be less than the future dollar amount of the cash flow.
True | |
False |
(Ignore income taxes in this problem.) James just received an $8,000 inheritance check from the estate of his deceased rich uncle. James wants to set aside enough money to pay for a trip in five years. If the trip is expected to cost $5,000, how much of the $8,000 must James deposit now if the rate of return is 12% per year in order to have the $5,000 in five years?
$2,535 | |
$2,835 | |
$2,000 | |
$5,000 |
(Ignore income taxes in this problem.) How much would you have to invest today in the bank at an interest rate of 5% to have an annuity of $1,400 per year for 5 years, with nothing left in the bank at the end of the 5 years? Select the amount below that is closest to your answer.
$6,667 | |
$6,061 | |
$7,000 | |
$1,098 |
(Ignore income taxes in this problem.) You have deposited $16,700 in a special account that has a guaranteed rate of return of 11% per year. If you are willing to completely exhaust the account, what is the maximum amount that you could withdraw at the end of each of the next 6 years? Select the amount below that is closest to your answer.
$3,465 | |
$3,089 | |
$2,783 | |
$3,947 |
Lucas Company recorded the following events last year: |
Repurchase by Lucas of its own common stock | $44,000 |
Sale of long-term investment | $63,000 |
Interest paid to lenders | $17,000 |
Dividends paid to the company’s shareholders | $73,000 |
Collection by Lucas of a loan made to another company | $49,000 |
Payment of taxes to governmental bodies | $27,000 |
On the statement of cash flows, some of these events are classified as operating activities, some are classified as investing activities, and some are classified as financing activities.
Based solely on the information above, the net cash provided by (used in) investing activities on the statement of cash flows would be:
$39,000 | |
$(7,000) | |
$(22,000) | |
$112,000 |
Ansbro Corporation’s most recent balance sheet appears below: |
Ansbro Corporation Comparative Balance Sheet |
||
Ending Balance |
Beginning Balance |
|
Assets: | ||
Cash and cash equivalents | $99 | $44 |
Accounts receivable | 56 | 59 |
Inventory | 76 | 111 |
Property, plant and equipment | 646 | 555 |
Less: accumulated depreciation | 254 | 229 |
Total assets | $623 | $540 |
Liabilities and stockholders’ equity: | ||
Accounts payable | $64 | $73 |
Accrued liabilities | 40 | 39 |
Income taxes payable | 27 | 51 |
Bonds payable | 252 | 223 |
Common stock | 98 | 92 |
Retained earnings | 142 | 62 |
Total liabilities and stockholders’ equity | $623 | $540 |
Net income for the year was $106. Cash dividends were $26. The company did not dispose of any property, plant, and equipment. It did not issue any bonds payable or repurchase any of its own common stock. The following question pertain to the company’s statement of cash flows
The net cash provided by (used in) operating activities for the year was:
$137 | |
$97 | |
$169 | |
−$31 |
Financial statements of Ansbro Corporation follow: |
Ansbro Corporation Comparative Balance Sheet |
||
Ending Balance |
Beginning Balance |
|
Assets: | ||
Cash and cash equivalents | $33 | $30 |
Accounts receivable | 84 | 81 |
Inventory | 43 | 40 |
Property, plant and equipment | 663 | 570 |
Less: accumulated depreciation | 348 | 308 |
Total assets | $475 | $413 |
Liabilities and stockholders’ equity: | ||
Accounts payable | $63 | $70 |
Bonds payable | 140 | 200 |
Common stock | 95 | 81 |
Retained earnings | 177 | 62 |
Total liabilities and stockholders’ equity | $475 | $413 |
Income Statement | |
Sales | $750 |
Cost of goods sold | 403 |
Gross margin | 347 |
Selling and administrative expenses | 134 |
Net operating income | 213 |
Income taxes | 78 |
Net income | $135 |
Cash dividends were $20. The company did not dispose of any property, plant, and equipment. It did not issue any bonds payable or repurchase any of its own common stock. The following questions pertain to the company’s statement of cash flows
the net cash provided by (used in) investing activities for the year was:
$(93) | |
$(20) | |
$(60) | |
$14 |
Boole Corporation’s net cash provided by operating activities was $140; its capital expenditures were $71; and its cash dividends were $30. The company’s free cash flow was:
$69 | |
$241 | |
$110 | |
$39 |
Megan Corporation’s net income last year was $100,000. Changes in the company’s balance sheet accounts for the year appear below: |
Increases (Decreases) | |
Asset and Contra-Asset Accounts: | |
Cash | $(4,600) |
Accounts receivable | $(16,000) |
Inventory | $4,000 |
Prepaid expenses | $(8,400) |
Long-term investments | $82,000 |
Property, plant and equipment | $59,000 |
Accumulated depreciation | $62,000 |
Liability and Equity Accounts: | |
Accounts payable | $0 |
Accrued liabilities | $16,600 |
Income taxes payable | $(12,000) |
Bonds payable | $(33,000) |
Common stock | $22,000 |
Retained earnings | $60,400 |
The company paid a cash dividend of $39,600 and it did not dispose of any long-term investments or property, plant, and equipment. The company did not issue any bonds payable or repurchase any of its own common stock. The following questions pertain to the company’s statement of cash flows.
The free cash flow for the year was:
$128,000 | |
$88,400 | |
$147,400 | |
$281,000 |
Salsedo Corporation’s balance sheet and income statement appear below:
Cash dividends were $9. The company sold equipment for $15 that was originally purchased for $10 and that had accumulated depreciation of $5. It did not issue any bonds payable or repurchase any of its own common stock.
The net cash provided by (used in) financing activities for the year was:
$(9) | |
$(15) | |
$(21) | |
$3 |
The data given below are from the accounting records of the Kuhn Corporation:
Based on this information, the net cash provided by operating activities using the indirect method would be:
$55,000 | |
$58,000 | |
$50,000 | |
$60,000 |
Adah Corporation prepares its statement of cash flows using the indirect method. Which of the following would be subtracted from net income in the operating activities section of the statement?
Option A | |
Option B | |
Option C | |
Option D |
Financial statements of Rukavina Corporation follow:
Cash dividends were $8. The company did not dispose of any property, plant, and equipment. It did not issue any bonds payable or repurchase any of its own common stock. The following question pertain to the company’s statement of cash flows.
The net cash provided by (used in) investing activities for the year was:
$26 | |
$15 | |
$(26) | |
$(15) |
Shoshoni Corporation prepares its statement of cash flows using the indirect method. Which of the following would be added to net income in the operating activities section of the statement?
Option A | |
Option B | |
Option C | |
Option D |
investing activities on the statement of cash flows generate cash inflows and outflows related to borrowing from and repaying principal to creditors and completing transactions with the company’s owners such as selling or repurchasing shares of common stocks and paying dividends.
True | |
False | |
|
|
|
The direct method of preparing the statement of cash flows will show the same increase or decrease in cash as the indirect method.
True | |
False |
In a statement of cash flows, issuing bonds payable affects the:
operating activities section. | |
financing activities section. | |
investing activities section. | |
free cash flow activities section. |
Randal Corporation recorded the following activity for the year just ended:
The net cash provided by financing activities for the year was:
$100,000 | |
$550,000 | |
$180,000 | |
$680,000 |
Krech Corporation’s comparative balance sheet appears below:
The company’s net income (loss) for the year was ($3,000) and its cash dividends were $3,000. It did not sell or retire any property, plant, and equipment during the year. The company uses the indirect method to determine the net cash provided by operating activities.
The company’s net cash provided by operating activities is:
$29,000 | |
$19,000 | |
$27,000 | |
$21,000 |