1.      A company had a market price of $47.50 per share, earnings per share of $5.00, and dividends per share…

1.      A company had a market price of $47.50 per share, earnings per share of $5.00, and dividends per share of $1.20. Its price-earnings ratio is equal to:

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9.5

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10.5

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4.2

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39.6

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24.00

2.      A company had a market price of $90.50 per share, dividends per share of $8.60, and earnings per share of $5.35. Its price-earnings ratio is equal to:

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6.49

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16.92

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10.52

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0.62

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0.154

3.      A company had a market price of $9.50 per share, earnings per share of $1.31, and dividends per share of $0.50. Its price-earnings ratio is equal to:

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19.00

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0.38

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0.191

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7.25

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5.25

4.      Corona Company’s balance sheet accounts follow:

  At December 31

2014

2013

2012

  Assets

  Cash

$32,171  

$37,469  

$37,491  

  Accounts receivable, net

84,337  

60,301  

47,461  

  Merchandise inventory

101,423  

79,797  

52,404  

  Prepaid expenses

14,633  

14,405  

9,738  

  Plant assets, net

248,157  

225,238  

205,851  

  Total assets

$480,721  

$417,210  

$352,945  

  Liabilities and Equity

  Accounts payable

$117,664  

$76,741  

$52,161  

  Long-term notes payable secured by mortgages on plant assets

95,397  

97,425  

80,341  

  Common stock, $10 par value

165,500  

165,500  

165,500  

  Retained earnings

102,160  

77,544  

54,943  

  Total liabilities and equity

$480,721  

$417,210  

$352,945  

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0.85

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0.58

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2.52

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0.80

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0.72

5.      Corona Company’s balance sheet accounts follow:

  At December 31

2014

2013

2012

  Assets

  Cash

$34,272  

$39,571  

$39,594  

  Accounts receivable, net

86,438  

62,403  

49,564  

  Merchandise inventory

103,524  

81,899  

54,507  

  Prepaid expenses

16,734  

16,507  

11,841  

  Plant assets, net

250,258  

227,340  

207,954  

  Total assets

$491,226  

$427,720  

$363,460  

  Liabilities and Equity

  Accounts payable

$120,866  

$79,943  

$55,265  

  Long-term notes payable secured by mortgages on plant assets

98,599  

100,627  

83,445  

  Common stock, $10 par value

166,500  

166,500  

166,500  

  Retained earnings

105,261  

80,650  

58,250  

  Total liabilities and equity

$491,226  

$427,720  

$363,460  

What is Corona Company’s accounts receivable turnover ratio for 2013, assuming net sales for the period were $1,335,731?

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23.86

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16.31

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4.49

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17.95

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21.40

6.      Corona Company’s balance sheet accounts follow:

  At December 31

2014

2013

2012

  Assets

  Cash

$44,777  

$50,081  

$50,109  

  Accounts receivable, net

96,943  

72,913  

60,079  

  Merchandise inventory

114,029  

92,409  

65,022  

  Prepaid expenses

27,239  

27,017  

22,356  

  Plant assets, net

260,763  

237,850  

218,469  

  Total assets

$543,751  

$480,270  

$416,035  

  Liabilities and Equity

  Accounts payable

$136,876  

$95,953  

$70,785  

  Long-term notes payable secured by mortgages on plant assets

114,609  

116,637  

98,965  

  Common stock, $10 par value

171,500  

171,500  

171,500  

  Retained earnings

120,766  

96,180  

74,785  

  Total liabilities and equity

$543,751  

$480,270  

$416,035  

What is Corona Company’s inventory turnover ratio for 2014, assuming net sales and gross profit for the period were $1,459,416, $1,020,062 respectively?

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11.04

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5.05

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4.75

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5.76

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4.26

7.      Corona Company’s balance sheet accounts follow:

  At December 31

2014

2013

2012

  Assets

  Cash

$38,474  

$43,775  

$43,800  

  Accounts receivable, net

90,640  

66,607  

53,770  

  Merchandise inventory

107,726  

86,103  

58,713  

  Prepaid expenses

20,936  

20,711  

16,047  

  Plant assets, net

254,460  

231,544  

212,160  

  Total assets

$512,236  

$448,740  

$384,490  

  Liabilities and Equity

  Accounts payable

$127,270  

$86,347  

$61,473  

  Long-term notes payable secured by mortgages on plant assets

105,003  

107,031  

89,653  

  Common stock, $10 par value

168,500  

168,500  

168,500  

  Retained earnings

111,463  

86,862  

64,864  

  Total liabilities and equity

$512,236  

$448,740  

$384,490  

What is Corona Company’s days’ sales in inventory ratio for 2014, assuming net sales and gross profit for the period were $1,385,205, $989,237 respectively?

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79.37

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83.55

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61.40

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99.30

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54.12

8.      A company has sales of $5,577,000, a gross profit ratio of 35%, ending merchandise inventory of $281,425, and total current assets of $3,539,600. What is the days sales’ in inventory ratio for the year?

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5.05

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63

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7.95

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28.34

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19.82

9.      A company has total assets of $6,920,482.00, common stock of $2,575,553.00, retained earnings of $1,348,695. What is the company’s debt ratio?

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37.22%

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65.63%

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43.30%

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52.37%

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34.37%

10.  A company has total assets of $7,280,482, common stock of $2,702,219, retained earnings of $1,428,351. What is the company’s equity ratio?

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43.27%

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37.12%

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80.38%

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34.58%

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56.73%

11.  A given project requires a $29,000 investment and is expected to generate end-of-period annual cash inflows as follows:

Year 1

Year 2

Year 3

Total

$11,600

$7,250

$10,150

$29,000

Assuming a discount rate of 9%, what is the net present value of this investment? Selected present value factors for a single sum are shown in the table below:

i = 9%

i = 9%

i = 9%

n = 1

n = 2

n = 3

0.91743

0.84168

0.77218

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($4,418)

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$7,830

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($21,170)

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$24,582

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$21,284

12.  A company wishes to buy new equipment for $115,000. The equipment is expected to generate an additional $50,000 in cash inflows for four years. All cash flows occur at year-end. A bank will make an $115,000 loan to the company at a 10% interest rate so that the company can purchase the equipment. Use the table below to determine the present value of the future cash flows and the net present value of the investment.

  Year

Present value of 1 at 10%

  0

1.0000  

  1

0.9091  

  2

0.8264  

  3

0.7513  

  4

0.6830  

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$158,490 and $86,980 respectively

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$208,490 and $93,490 respectively

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$158,490 and $43,490 respectively

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$200,000 and $65,000 respectively

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$208,490 and $170,925 respectively

13.  A company is considering purchasing a machine for $25,500. The machine will generate an after-tax net income of $2,900 per year. Annual depreciation expense would be $2,400. What is the payback period for the new machine?

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4.81 years.

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9.42 years.

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8.79 years.

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10.63 years.

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9.42 years.

14.  A company is considering the purchase of a new piece of equipment for $78,000. Predicted annual cash inflows from this investment are $31,200 (year 1); $26,000 (year 2); $15,600 (year 3); $9,600 (year 4); and $4,800 (year 5). The payback period is:

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4.58 years.

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4.54 years.

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2.54 years.

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3.00 years.

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3.54 years

15.  A company is considering the purchase of a new machine for $35,200. Management predicts that the machine can produce sales of $18,400 each year for the next 10 years. Expenses are expected to include direct materials, direct labor, and factory overhead totaling $9,600 per year plus depreciation of $4,800 per year. The company’s tax rate is 40%. What is the approximate accounting rate of return for the machine?

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11.4%

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13.6%

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1.9%

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40.9%

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22.7%

16.  A company is considering the purchase of a new machine for $96,000. Management predicts that the machine can produce sales of $22,000 each year for the next eight years. Expenses are expected to include direct materials, direct labor, and factory overhead totaling $4,800 per year plus depreciation of $7,200 per year. The company’s tax rate is 40%. What is the payback period for the new machine?

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7.27 years

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9.60 years

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16.00 years

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4.36 years

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5.58 years

17.  A company is planning to purchase a machine that will cost $126,000, have a six-year life, and be depreciated using the straight-line method with no salvage value. The company expects to sell the machine’s output of 3,000 units evenly throughout each year. A projected income statement for each year of the asset’s life appears below.

  Sales

$192,000   

  Costs:

  Manufacturing

$77,500  

  Depreciation on machine

21,000  

  Selling and administrative expenses

  Income before taxes

$ 38,000   

  Income tax (50%)

( 19,000)  

  Net income

What is the accounting rate of return for this machine?

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15.08%

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4%

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30.16%

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33.30%

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50.00%

18.  A company is planning to purchase a machine that will cost $125,000, have a seven-year life, and be depreciated using the straight-line method with no salvage value. The company expects to sell the machine’s output of 4,000 units evenly throughout each year. A projected income statement for each year of the asset’s life appears below:

  Sales

$209,000   

  Costs:

  Manufacturing

$90,500  

  Depreciation on machine

20,000  

  Selling and administrative expenses

  Income before taxes

$ 36,000   

  Income tax (50%)

( 18,000)  

  Net income

What is the payback period for this machine?

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62.500 years

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3.289 years

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1.000 year

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6.940 years

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3.470 years

19.  A company buys a machine for $84,000 that has an expected life of nine years and no salvage value. The company anticipates a yearly net income of $8,850 after taxes of 30%, with the cash flows to be received evenly throughout of each year. What is the accounting rate of return?

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10.54%

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21.07%

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11.11%

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94.82%

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35.12%

20.  Beyer Corporation is considering buying a machine for $38,000. Its estimated useful life is five years, with no salvage value. Beyer anticipates annual net income after taxes of $3,100 from the new machine. What is the accounting rate of return assuming that Beyer uses straight-line depreciation and that income is earned uniformly throughout each year?

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10.00%

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8.16%

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13.16%

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13.66%

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16.32%