Question

22. Net Present Value

A project has estimated annual net cash flows of $12,500 for one years and is estimated to cost $42,500. Assume a minimum acceptable rate of return of 10%. Use the Present Value of an Annuity of $1 at Compound Interest table below.

Present Value of an Annuity of $1 at Compound Interest
Year	6%	10%	12%	15%	20%
1	0.943	0.909	0.893	0.870	0.833
2	1.833	1.736	1.690	1.626	1.528
3	2.673	2.487	2.402	2.283	2.106
4	3.465	3.170	3.037	2.855	2.589
5	4.212	3.791	3.605	3.353	2.991
6	4.917	4.355	4.111	3.785	3.326
7	5.582	4.868	4.564	4.160	3.605
8	6.210	5.335	4.968	4.487	3.837
9	6.802	5.759	5.328	4.772	4.031
10	7.360	6.145	5.650	5.019	4.192

Determine (a) the net present value of the project and (b) the present value index. If required, use the minus sign to indicate a negative net present value.

Net present value of the project (round to the nearest dollar)	$
Present value index (rounded to two decimal places)

23.

The following information pertains to Tanzi Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit.

Assets
Cash and short-term investments	$35,645
Accounts receivable (net)	31,609
Inventory	37,333
Property, plant and equipment	225,657
Total Assets	$330,244
Liabilities and Stockholders' Equity
Current liabilities	$57,327
Long-term liabilities	95,232
Stockholders' equity-common	177,685
Total Liabilities and stockholders' equity	$330,244
Income Statement
Sales	$91,722
Cost of goods sold	41,275
Gross margin	$50,447
Operating expenses	21,898
Net income	$28,549
Number of shares of common stock	5,413
Market price of common stock	$27

What is the current ratio for this company? Round your answer to two decimal places.

Select the correct answer.

2.22

0.62

1.82

1.17

24. The Cash and Accounts Receivable end-of-year balances for a company are provided below:

	Current Year		Prior Year
Cash	$43,092		$34,200
Accounts receivable (net)	29,504		46,100

Based on this information, what is the amount and percentage of increase or decrease that would be shown with horizontal analysis? Enter a decrease using a minus sign before the amount and the percentage.

	Amount		Percentage
Cash	$		%
Accounts Receivable	$		%

25. The following items are reported on a company's balance sheet:

Cash	$233,400
Marketable securities	97,800
Accounts receivable	268,800
Inventory	189,700
Accounts payable	296,400

Round your answers to two decimal places.

a. Determine the current ratio.
     

b. Determine the quick ratio.
     

Answer 1

Answer:
22)
Particulars	Amount (in $ )
Present value of cash flows ( Annual cash Flows x PVAF ( 10%, 1 Year) ( $ 12,500 x 0.909)	$ 11,362.50
Less: Initial investment	($ 42,500)
Net Present Value	($ 31,138)
Present value index           =   Present value of cash inflows / investment           =   $ 11,362.50 / $ 42,500           =    0.27
Present value index	0.27
23)
Current assests          = Total Assests (-) Property, plant and equipment          =   $ 330,244 (-) $ 225,657          =   $ 104,587
Current Ratio           = Current assests / Current Liabilities           = $ 104,587 / $ 57,327	1.82
24)
	Dollar change	Percent change
Cash	$ 8,892 ( $ 43,092 (-) $ 34,200 )	26% ( $ 8,892 / $ 34,200 )	Increase
Accounts Receivable	($ 16,596 ) ( $ 29,504 (-) $ 46,100 )	(36% ) ( $ 16,596 / $ 46,100)	Decrease
25)
Particulars	Amount (in $ )
Cash	$ 233,400
Marketable securities	$ 97,800
Accounts receivable	$ 268,800
Inventory	$ 189,700
Current Assets	$ 789,700
Current Ratio           = Current assests / Current Liabilities           = $ 789,700 / $ 296,400           =    2.66	2.66
Quick Ratio           = (Current assests (-)Inventory ) / Current Liabilities           = ($ 789,700 (-) $ 189,700 )/ $ 296,400           =   $ 600,000 / $ 296,400           =    2.02	2.02