Exam 4 222

Bluff View Services has purchased new equipment for 173,400. The equipment is expected to last for three years and to provide cash inflows as follows: Year 1: $55,000 Year 2: ??? Year 3: $85,000 Assuming that the equipment will yield exactly a 14% rate of return, what is the expected cash inflow for Year 2?

$88,089.24

Rogers Company is studying a project that would have a ten-year life and would require an 800,000 investment in equipment which has no salvage value. The project would provide NOI each year as follows.... The company's required rate of return is 8%. What is the payback period for this project?

4 years

Jim Bingham is considering starting a small catering business. He would need to purchase a delivery van and various equip costing 125,000 to equip the business. Jim's marketing studies indicate that the annual cash inflow from the business will amount to 120,000. In addition to the building rent, annual cash outflow for operating costs will amount to 40,000. Jim wants to operate the catering business for only six years. He estimates that the equipment could be sold at the time for 4% of its original cost. Jim uses a 16% discount rate. What is the internal rate of return on this business venture?

60.21%

Glunn Company. Calculate the CM per unit of constrained resource for PRODUCT A:

7.62

Glunn Company. Up to how much should the company be willing to pay for one additional hour of mixing machine time if the company has made the best use of the existing mixing machine capacity?

7.62

Glunn Company. Calculate the CM per unit of constrained resource for PRODUCT C:

9.33

Glunn Company. Calculate the CM per unit of constrained resource for PRODUCT B:

9.50

If Varone can expect to sell 32,000 Homs next year through regular channels and thespecial order is accepted at 15% off the regular selling price, the effect on net operatingincome next year due to accepting this order would be a A) $52,000 increase B) $80,000 Increase C) $24,000 decrease D) $68,000 increase

A) $52,000 increase

If N is processed further and then sold, rather than being sold at the split-off point, the change in monthly operating income would be a: A) 30,000 increase B) 315,000 increase C) 155,000 increase D) 125,000 decrease

A) 30,000 increase

Fries Corporation. What would be the effect on the company's overall net operating income if product R89H were dropped? A) Overall net operating income would decrease by $66,000 B) Overall net operating income would decrease by $8,000 C) Overall net operating income would increase by $66,000 D) Overall net operating income would increase by $8,000

A) Overall net operating income would decrease by $66,000

A project requires an initial investment of 60,000 and has a profitablility index of 0.329. The present value of the future cash inflows from this investment is: A. $79,740 B. $45, 147 C. $60,000 D. Cannot be determined with available data

A. $79,740

Spools Division of Coats Company. Suppose the manager of Spools desires an annual residual income of $45,000. In order to achieve this, Spools should sell how many units per year? A) 14,500 B) 16,750 C) 18,250 D) 19,500

B) 16,750

Girman Corporation is considering three investment projects: K, L, and M. Project K would require an investment of 27,000, Project L of 59,000, and project M of 88,000. No other cash outflows would be involved. The present value of the cash inflows would be 31,860 for Project K, 66,080 for Project L, and 95,040 for Project M. Rank the projects according to the profitability index, from most profitable to least. A. K, M, L B. K, L, M C. L, M, K D. L, K, M

B. K, L, M

Spools Division of Coats Company. Suppose the manager of Spools desires to ROI of 22%. In order to achieve this goal, Spools must sell how many units per year? A) 14,500 B) 16,750 C) 18,250 D) 19,500

C) 18,250

What would the selling price per unit of product N need to be after further processing in order for Payne Company to be economically indifferent between selling N at the split-off point or processing N further? A) positive B) negative C) zero D) unknown

C) zero

If management decides to buy part O13 from the outside supplier rather than to continue making the other part, what would be the annual impact on the company's overall net operating income? A) Net operating income would decline by $23,100 per year. B) Net operating income would decline by $26,100. C) Net operating income would decline by $20,100 D) Net operating income would decline by $8,700 per year

D) Net operating income would decline by $8,700 per year

What would be the impact on the company's overall net operating income of buying part O13 from the outside supplier and using the freed space to make more of the other products? A) Net operating income would decline by $49,100 per year B) Net operating income would increase by $26,000 per year. C) Net operating income would increase by $2,900 per year D) Net operating income would increase by $17,300

D) Net operating income would increase by $17,300

The opportunity cost of making a component in a factory with no excess capacity is the: A) variable manufacturing costs of the component B) foxed manufacturing costs of the component C) total manufacturing costs of the component D) net benefits foregone from the best alternative use of the capacity required

D) net benefits foregone from the best alternative use of the capacity required

Houis Inc. is considering the acquisition of a new machine that costs 300,000 and has a useful life of 5 years with no salvage value. The incremental net operating income and incremental net cash flows that would be produced by the machine are..... The payback period of this investment is: A. 1.8 years B. 5.0 years C. 2.1 years D. 2.9 years

D. 2.9 years

The management of Mazor Corporation is considering the purchase of a machine that would cost $144,144 and would have a useful life of 5 years. The machine would have no salvage value. The machine would reduce labor and other operating costs by $39,000 per year. The internal rate on the investment in the new machine is closest to:

IRR: 11%

The working capitol would be released for use else where when the project is completed. What is the net present value of the project, using a discount rate of 8%

NPV: 2,567.39

Farah Corporation has provided the following data concerning a proposed investment project. The company uses a discount rate of 11%. The working capital would be released at the end of the project. Compute the net present value of the project.

NPV: 24,026.54

The sale of equipment at a gain would be shown on the statement of cash flows prepared under the indirect method in which of the following manners? a) Cash received would be shown under Investing Activities and the gain would be subtracted from net income b) Cash received would be shown under Investing Activities and the gain would be added to net income c) Cash received would be shown under Investing Activities and the gain would not appear on the statement of cash flows d) Cash received would be shown as an adjustment to net income and the gain would not appear on the statement of cash flows

a) Cash received would be shown under Investing Activities and the gain would be subtracted from net income

Ieso Company. Sales in Store J totaled: a) 400,000 b) 250,000 c) 150,000 d) 100,000

b) 250,000

Licuado is considering the implementation of $5,000 advertising program specifically targeted at one of the four product lines. The program is expected to increase sales for any one of the product lines by $12,000. If the goal is to maximize the company's net operating income, for which product line should Licuado implement the advertising program? a) Orange b) Tomato c) Carrot d) Grape E) any one of the product lines, the effect on net operating income will be identical

b) Tomato

Ieso Company's total fixed expenses for the year were: a) 40,000 b) 100,000 c) 140,000 d) 170,000

c) 140,000

Which of the following will not result in an increase in ROI, assuming other factors remain the same? a) a reduction in expenses b) an increase in net operating income c) an increase in operating assets d) an increase in sales

c) an increase in operating assets

Ieso Company. Variable expenses in Store K totaled: a) 70,000 b) 110,000 c) 200,000 d) 130,000

d) 130,000

More Company. Based solely on this information, the net cash provided by operating activities under the indirect method on the statement of cash flows would be: A) 63,000 b) 32,000 c) 18,000 d) 56,000

d) 56,000

If Thompson Company did not issue any bonds payable during the year and its bonds payable account decreased by $200,000 over the course of a year, then this amount would be shown on the company's statement of cash flows prepared under the indirect method as: a) a cash inflow of 200,000 under investing activities b) a cash outflow of 200,000 under investing activities c) a cash inflow of 200,000 under financing activities d) a cash outflow of 200,000 under financing activities

d) a cash outflow of 200,000 under financing activities