1. The Higgins Company has just purchased a piece of equipment at a cost of $300,000. This equipment will reduce operating costs by $55,000 each year for the next eleven years. This equipment replaces old equipment which was sold for $14,000 cash. The new equipment has a payback period of: (Ignore income taxes.)  (Round your answer to 1 decimal place.)A. 16.2 YearsB. 5.5 YearsC. 5.2 YearsD. 11.10

2. The management of Serpas Corporation is considering the purchase of a machine that would cost $170,000, would last for 5 years, and would have no salvage value. The machine would reduce labor and other costs by $41,000 per year. The company requires a minimum pretax return of 11% on all investment projects. (Ignore income taxes.)

Click here to view Exhibit 13B-2 to determine the appropriate discount factor(s) using tables.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.)

A.-18,464B. 35,000C.-33,811D. 27,384

3. Lett Corporation is investigating buying a small used aircraft for the use of its executives. The aircraft would have a useful life of 12 years. The company uses a discount rate of 17% in its capital budgeting. The net present value of the investment, excluding the salvage value of the aircraft, is -$578,526. (Ignore income taxes.)

Click here to view Exhibit 13B-1 to determine the appropriate discount factor(s) using tables.Management is having difficulty estimating the salvage value of the aircraft. How large would the salvage value of the aircraft have to be to make the investment in the aircraft financially attractive? (Round discount factor(s) to 3 decimal places and final answers to the nearest dollar amount.)

A. $3,806,092B. $3,403,094C. $98,349D. $578,526

4.

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 4 years. The company uses a discount rate of 10% in its capital budgeting. The net present value of the investment, excluding the intangible benefits, is −$316,080. (Ignore income taxes.)Click here to view Exhibit 13B-2 to determine the appropriate discount factor(s) using tables.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.)

$31,608

$316,080

$79,020

$99,710

5.

The management of Melchiori Corporation is considering the purchase of a machine that would cost $360,000, would last for 6 years, and would have no salvage value. The machine would reduce labor and other costs by $116,000 per year. The company requires a minimum pretax return of 14% on all investment projects. (Ignore income taxes.)

Click here to view Exhibit 13B-2, to determine the appropriate discount factor(s) using tables.

The present value of the annual cost savings of $116,000 is closest to: (Round discount factor(s) to 3 decimal places and final answer to the nearest dollar amount.)

$451,124

$175,448

$1,091,462

$696,0006.

Gull Inc. is considering the acquisition of equipment that costs $550,000 and has a useful life of 6 years with no salvage value. The incremental net cash flows that would be generated by the equipment are: (Ignore income taxes.)

Incremental netcash flows

Year 1 $145,000Year 2 $195,000Year 3 $156,000Year 4 $165,000Year 5 $155,000Year 6 $135,000

Click here to view Exhibit 13B-1 to determine the appropriate discount factor(s) using tables.

If the discount rate is 13%, the net present value of the investment is closest to: (Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar

amount.)$435,000

$148,776

$89,228

$591,2647.

Charley has a typing service. He estimates that a new computer will result in increased cash inflow $1,100 in Year 1, $1,500 in Year 2 and $2,500 in Year 3. (Ignore income taxes.)

Click here to view Exhibit 13B-1 to determine the appropriate discount factor(s) using tables.

If Charley's required rate of return is 12%, the most that Charley would be willing to pay for the new computer would be: (Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount.)

$3,459

$2,296

$3,278

$3,9588.

Shields Company has gathered the following data on a proposed investment project: (Ignore income taxes.)

  Investment required in equipment $460,000  Annual cash inflows $77,000  Salvage value $0  Life of the investment 16 years  Discount rate 12% The simple rate of return on the investment is closest to: (Round your answer to the closest interest rate.)

5%

10%

15%

11%

9.

Sibble Corporation is considering the purchase of a machine that would cost $330,000 and would last for 7 years. At the end of 7 years, the machine would have a salvage value of $25,000. By reducing labor and other operating costs, the machine would provide annual cost savings of $63,000. The company requires a minimum pretax return of 11% on all investment projects. (Ignore income taxes.)

Click here to view Exhibit 13B-1 and Exhibit 13B-2 to determine the appropriate discount factor(s) using tables.

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.)

−$45,194

−$33,144

−$8,144

−$21,094

10.

Shields Company has gathered the following data on a proposed investment project: (Ignore income taxes.)

  Investment required in equipment $470,000  Annual cash inflows $77,000  Salvage value $0  Life of the investment 20 years  Discount rate 14%

Click here to view Exhibit 13B-2 to determine the appropriate discount factor(s) using tables.

The internal rate of return on the investment is closest to: (Round discount factor(s)  to 3 decimal places and final answer to the closest interest rate.)

12%

14%

16%

18%

11.

Cezar Corporation's comparative balance sheet appears below: 

Cezar CorporationComparative Balance Sheet

EndingBalance

BeginningBalance

  Assets:  Current assets:  Cash and cash equivalents $ 84,000 $ 51,000  Accounts receivable 33,900 41,000  Inventory 76,200 71,000  Total current assets 194,100 163,000  Property, plant, and equipment 535,500 510,000  Less accumulated depreciation 195,500 171,000  Net property, plant, equipment 340,000 339,000  Total assets $534,100 $502,000  Liabilities and Stockholders' Equity  Current liabilities:  Accounts payable $ 27,800 $ 31,000  Accrued liabilities 61,800 71,000  Income taxes payable 63,600 61,000  Total current liabilities 153,200 163,000  Bonds payable 96,200 91,000  Total liabilities 249,400 254,000  Stockholders' equity:  Common stock 42,000 51,000  Retained earnings 242,700 197,000  Total stockholders' equity 284,700 248,000  Total liabilities and stockholders' equity $534,100 $502,000

The company did not dispose of any property, plant, and equipment during the year. Its net income for the year was $48,400 and its cash dividends were $2,700. The company did not retire any bonds payable or issue any common stock during the year. Its net cash provided by operating activities and net cash used in financing activities are:

net cash provided by operating activities, $31,600; net cash used in financing activities,$7,900net cash provided by operating activities, $31,600; net cash used in financing activities,$6,500net cash provided by operating activities, $65,000; net cash used in financing activities,$6,500net cash provided by operating activities, $65,000; net cash used in financing activities,$7,900

12.

Nordquist Company's net income last year was $31,000. The company did not sell or retire any property, plant, and equipment last year. Changes in selected balance sheet accounts for the year appear below:

Increases(Decreases)

  Asset and Contra-Asset Accounts:    Accounts receivable $15,500    Inventory $(4,000)    Prepaid expenses $11,000    Accumulated depreciation $28,000  Liability Accounts:    Accounts payable $15,000    Accrued liabilities $(8,500)    Income taxes payable $3,100

Based solely on this information, the net cash provided by operating activities under the indirect method on the statement of cash flows would be:

$68,600

$15,900

$46,100

$91,100

13. Last year Burford Company's cash account decreased by $33,000. Net cash used in investing activities was $8,800. Net cash provided by financing activities was $29,500. On the statement of cash flows, the net cash flow provided by (used in) operating activities was:

$20,700

$(53,700)

$(33,000)

$(12,300)

14.

Mccloe Corporation's balance sheet and income statement appear below:

Mccloe Corporation

Comparative Balance SheetEndingBalance

BeginningBalance

  Assets:  Cash and cash equivalents $ 58 $ 43  Accounts receivable 48 62  Inventory 78 62  Property, plant and equipment 535 520  Less: accumulated depreciation 275 262  Total assets $444 $425  Liabilities and stockholders' equity:  Accounts payable $ 71 $ 57  Accrued liabilities 44 28  Income taxes payable 57 57  Bonds payable 77 144  Common stock 47 42  Retained earnings 148 97  Total liabilities and stockholders' equity $444 $425

  Income Statement  Sales $568  Cost of goods sold 360  Gross margin 208  Selling and administrative expenses 141

  Net operating income 67  Gain on sale of plant and equipment 22

  Income before taxes 89  Income taxes 32  Net income $ 57

Cash dividends were $6. The company did not issue any bonds or repurchase any of its own common stock during the year. The net cash provided by (used in) financing activities for the year was:

rev: 05_24_2013_QC_31013 $(67)

$(68)

$(6)

$5

15.

Lueckenhoff Corporation's most recent balance sheet appears below:

Lueckenhoff CorporationComparative Balance Sheet

EndingBalance

BeginningBalance

  Assets:  Cash and cash equivalents $ 44 $ 40  Accounts receivable 59 52  Inventory 86 80  Property, plant and equipment 790 732  Less: accumulated depreciation 289 206  Total assets $690 $698  Liabilities and stockholders' equity:  Accounts payable $ 37 $ 34  Bonds payable 460 668  Common stock 72 64  Retained earnings 121 (68)  Total liabilities and stockholders' equity $690 $698

The company's net income for the year was $242 and it did not sell or retire any property, plant, and equipment during the year. Cash dividends were $53. The net cash provided by (used in) operating activities for the year was:

$315

$73

$169

$368

16.

Hocking Corporation's comparative balance sheet appears below:

Hocking CorporationComparative Balance Sheet

EndingBalance

BeginningBalance

  Assets:

  Current assets:  Cash and cash equivalents $ 47,000 $ 27,000  Accounts receivable 22,300 27,000  Inventory 61,700 57,000  Prepaid expenses 15,300 17,000  Total current assets 146,300 128,000  Property, plant, and equipment 356,000 337,000  Less accumulated depreciation 176,000 144,000  Net property, plant, and equipment 180,000 193,000  Total assets $326,300 $321,000  Liabilities and Stockholders' Equity  Current liabilities:  Accounts payable $ 21,700 $ 18,000  Accrued liabilities 65,700 57,000  Income taxes payable 49,700 47,000  Total current liabilities 137,100 122,000  Bonds payable 64,500 77,000  Total liabilities 201,600 199,000  Stockholders' equity:  Common stock 34,300 38,000  Retained earnings 90,400 84,000  Total stockholders' equity 124,700 122,000  Total liabilities and stockholders' equity

$326,300 $321,000

The company's net income (loss) for the year was $8,800 and its cash dividends were $2,400. It did not sell or retire any property, plant, and equipment during the year.

The company's net cash used in investing activities is:$19,000

$36,700

$13,000

$51,000

17. Hocking Corporation's comparative balance sheet appears below:

Hocking CorporationComparative Balance Sheet

EndingBalance

BeginningBalance

  Assets:  Current assets:  Cash and cash equivalents $ 57,000 $ 37,000  Accounts receivable 31,300 37,000  Inventory 72,700 67,000  Prepaid expenses 24,300 27,000  Total current assets 185,300 168,000  Property, plant, and equipment 374,000 347,000  Less accumulated depreciation 196,000 164,000  Net property, plant, and equipment 178,000 183,000  Total assets $363,300 $351,000  Liabilities and stockholders' equity  Current liabilities:  Accounts payable $ 32,700 $ 28,000  Accrued liabilities 76,700 67,000  Income taxes payable 60,700 57,000  Total current liabilities 170,100 152,000  Bonds payable 59,000 87,000  Total liabilities 229,100 239,000  Stockholders' equity:  Common stock 45,400 48,000  Retained earnings 88,800 64,000  Total stockholders' equity 134,200 112,000  Total liabilities and stockholders' equity

$363,300 $351,000

The company's net income (loss) for the year was $31,000 and its cash dividends were $6,200. 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:$89,500

$78,100

$83,800

$51,800

18. Boole Corporation's net cash provided by operating activities was $125; its capital expenditures were $68; and its cash dividends were $27. The company's free cash flow was:

$30

$98

$57

$220

19.

Financial statements of Ansbro Corporation follow:

Ansbro CorporationComparative Balance Sheet

EndingBalance

BeginningBalance

  Assets:  Cash and cash equivalents $ 38 $ 35  Accounts receivable 94 86  Inventory 53 45  Property, plant and equipment 738 620  Less: accumulated depreciation 358 313  Total assets $565 $473  Liabilities and stockholders' equity:  Accounts payable $ 71 $ 80  Bonds payable 165 250  Common stock 104 86  Retained earnings 225 57  Total liabilities and stockholders' equity $565 $473

  Income Statement  Sales $775  Cost of goods sold 438  Gross margin 337  Selling and administrative expenses 104

  Net operating income 233  Income taxes 40  Net income $ 193

Cash dividends were $25. 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:$118

$(73)

$73$(118)

20.

Schleich Corporation's most recent balance sheet appears below:

Schleich CorporationComparative Balance Sheet

EndingBalance

BeginningBalance

  Assets:  Cash and cash equivalents $ 42 $ 31  Accounts receivable 40 27  Inventory 52 67  Property, plant and equipment 744 552  Less: accumulated depreciation 286 264  Total assets $592 $413  Liabilities and stockholders' equity:  Accounts payable $ 57 $ 74  Accrued liabilities 22 20  Income taxes payable 45 30  Bonds payable 107 168  Common stock 87 82  Retained earnings 274 39  Total liabilities and stockholders' equity $592 $413

Net income for the year was $330. Cash dividends were $62. The company did not sell or retire any property, plant, and equipment during the year. The net cash provided by (used in) operating activities for the year was:

$306

$24

$465

$354