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ACCT.

525

Fall 2011

Online Exam 3 (3 points each)

Due: Midnight, Thursday December 15

19. (Ignore income taxes in this problem.) Almendarez Corporation is considering the purchase of a machine that would cost $320,000 and would last for 7 years. At the end of 7 years, the machine would have a salvage value of $51,000. By reducing labor and other operating costs, the machine would provide annual cost savings of $72,000. The company requires a minimum pretax return of 18% on all investment projects. The net present value of the proposed project is:

20. (Ignore income taxes in this problem.) Paragas, Inc., is considering the purchase of a machine that would cost $370,000 and would last for 8 years. At the end of 8 years, the machine would have a salvage value of $52,000. The machine would reduce labor and other costs by $96,000 per year. Additional working capital of $4,000 would be needed immediately. All of this working capital would be recovered at the end of the life of the machine. The company requires a minimum pretax return of 19% on all investment projects. The net present value of the proposed project is:

21. (Ignore income taxes in this problem.) Undersymington Company has an opportunity to invest in a machine that would cost $28,000, and that would produce cost savings of $8,000 each year for the next five years. If the machine has zero salvage value, then the internal rate of return is:

22. Evita Corporation prepares its statement of cash flows using the indirect method. Evita's statement showed "Net cash provided by operating activities" to be $46,000. Under the direct method, this number would have been:

24. During the year the balance in the prepaid expenses account increased by $6,000. In order to adjust the company's net income to a cash basis using the direct method on the statement of cash flows, it would be necessary to:

26. The following transactions occurred last year at Jobb Company:

Based solely on the above information, the net cash provided by financing activities for the year on the statement of cash flows would be:

(for questions 27-29) Karpinski Corporation's most recent comparative balance sheet and income statement appear below:

27. The net cash provided by (used by) operations for the year was:

28. The net cash provided by (used by) investing activities for the year was:

29. The net cash provided by (used by) financing activities for the year was:

30. Consolo Corporation's net income for the most recent year was $809,000. A total of 100,000 shares of common stock and 200,000 shares of preferred stock were outstanding throughout the year. Dividends on common stock were $2.05 per share and dividends on preferred stock were $1.80 per share. The earnings per share of common stock is:

31. Orgeron Corporation's most recent balance sheet and income statement appear below:

Dividends on common stock during Year 2 totaled $50 thousand. Dividends on preferred stock totaled $5 thousand. The market price of common stock at the end of Year 2 was $11.30 per share. The earnings per share of common stock for Year 2 is:

32. The market price of Friden Company's common stock increased from $15 to $18. Earnings per share of common stock remained unchanged. The company's price-earnings ratio would:

(for questions 33-34) Financial statements for Narasaki Company appear below:

33. Narasaki Company's times interest earned for Year 2 was:

34. The current ratio for Year 2 is: