Efereefe

Chapter 1
P1-2 Accrual income versus cash flow for a period (page 27). Thomas Boo Sales, Inc., supplies textbooks to college and universities bookstores. The books are shipped with a proviso that they must be paid for within 30 days but can be returned a full refund credit within 90 days. In 2009, Thomas shipped and billed book tittles totalling $760,000. Collections, net of return credits,during the year totalled $690,000. The company spent $300,000 acquiring the books that it shipped.
a. Using accrual accounting and the preceding values, show the firms’ net profit for the past year,
b. Using cash accounting and the preceding values, show the firms’ cash flow for the past year,
c. Which of these statements is the more useful to the financial managers? Why?

P1-4Marginal cost-benefit analysis and the goal of the firm (page 28). Ken Allen, capital budgeting analyst for Bally Gears, Inc., has been asked to evaluate a proposal. The manager of the automotive division believes that replacing the robotics used on the heavy truck gear line will produce total benefits of $ 560,000 (in todays’ dollars) over the next 5 years. The existing robotics would producebenefits of $ 400,000 (also in todays’ dollars) over the same period. An initial cash investment of $ 220,000 would be required to install the new equipment. The manager estimates that the existing robotics can be sold for $ 70,000. Show how Ken will apply marginal-cost-benefit analysis technique of the proposed new robotics.

a. The marginal (added) benefits of the proposed new robotics,
b.The marginal (added) costo of the proposed new robotics,
c. The new benefit of the proposed new robotics,
d. What should Ken Allen recommend that the company do? Why?
e. What factors besides the cost and benefits should be considered before the final decision is made?

Chapter 4

P4-5 Classifying inflows and outflows of cash (page 147). Classify each of the following items as aninflow (I) or an outflow (O) of cash, or as neither (N)

P4-6 Finding operating a free cash flow (page 147). Consider the balance sheets and selected data from the income statement of the Keith Corporation that appear below and on the next page.

a. Calculate the firms’ net operating profit after taxes (NOPAT) for the year ended December 31, 2012, using Equation 4.1.
b. Calculatethe firms’ operating cash flow (OCF) for the year ended December 31, using equation 4.3.
c. Calculate the firms’ free cash flow (FCF) for the year ended December 31, 2012, using equation 4.5.
d. Interpret, compare, and contrast your cash flow estimates in parts b and c.

P4-7 Cash receipts (page 148). A firm has actual sales of $ 65,000 in April and $ 60,000 in May. It expects sales of $70,000 in June and $ 100,000 in July and in August. Assuming that the sales are only source of cash inflows and that half of them are for the cash and the remainder are collected evenly over the following 2 months, what are the firms’ expected cash receipts for June, July, and August?

P4-8 Cash disbursements schedule (page 148). Maris Brothers, Inc., needs a cash disbursement schedule forthe months of April, May, and June. Use the format of Table 4.9 (page 130) and the following information in its preparation.
Sales: February = $ 500,000; March = $500,000; April = $560,000; May = $610,000; June = $650,000; July = $650,000
Purchases: Purchases are calculated as 60% of the next months’ sales, 10% of the purchases are made in cash, 50% of purchases are paid for 1 month afterpurchase, and the remaining 40% of purchases are paid in 2 months after the purchase.
Rent: The firm pays rent of $ 8,000 per month.
Wages and salaries: Base wage and salary casts are fixed at $ 6,000 per month plus a variable cost of 7% of the current months’ sales.
Taxes: A tax payment of $ 54,000 is due in June.
Fixed assets outlays: New equipment costing $ 75,000 will be bought and paid for in...