finance

Planning for capital investments is an important function of management. You are provided with the following data concerning a proposed capital investment: cash cost $220,000, net annual cash flows $40,000, present value factor of cash inflows for ten years 5.65 (rounded). Determine the net present value, and indicate whether the investment should be made. (1) Explain the pros and cons of using this method to evaluate a capital expenditure (10 points) and (2) show all computations required to arrive at the correct solution. (15 points). (Points : 25) 2. (TCO 6) To adequately plan for the success of the business a budget must be developed. (1) Explain the principal sections of a cash budget (10 points) and (2) indicate the applicability of budgeting in nonmanufacturing companies (15 points). Include textbook page references to identify where the correct answer was located. (Points : 25) 3. (TCO 4) Financial statement analysis is used by investors, creditors and managers of business to evaluate the operation and health of the business. This information is in part the basis for decision making. (1) Identify ratios used to evaluate the profitability of a company (10 points) and (2) provide an example of how the results of this analysis could be used to make business decisions. (15 points). (Points : 25) 4. (TCO 2) There are three different forms of business; sole-proprietor, partnership and corporation. (1) Explain why a corporation's government regulations may be a disadvantage (10 points) and (2) as a stockholder explain why a stockholder would want to own preferred stock. (15 points). (Points : 25) 5. (TCO 5) Ajax Company has a unit selling price of $520, variable costs per unit of $286, and fixed costs of $187,000. Compute the break-even point in units using (a) the mathematical equation and (b) contribution margin per unit.. (1) Explain how the determination of the break-even point is to be performed (10 points) and (2) Show the computations of both methods required to arrive at the correct answers. (20 points or 10 points per solution). (Points : 30) 6. (TCO 9) Warsaw Products has a factory machine with a book value of $90,000 and a remaining useful life of 4 years. A new machine is available at a cost of $250,000. This machine will have a 4-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $600,000 to $500,000. Prepare an analysis showing whether the old machine should be replaced or retained. (1) Explain how the analysis is to be performed (10 points) and (2) Show all computations required to arrive at the correct answer. (20 points). (Points : 30)