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1. Valley Sand and Gravel, Inc. are purchasing a new crusher for$500,000. It will have a ten year life and the salvage can be soldfor $50,000 at the end of year ten. There will be a major repairsat the end of year five and it will cost $10,000. Cash inflows areprojected to be $80,000 per year. The firm’s cost of capital is14%.

Calculate the NPV of the project.

Should they accept the project or not, and why?

2. Refer to Exhibits A and B below to answer the questions thatfollow.

Exhibit A
Jordan Corporation
Balance Sheet
September 30, 2015

Assets

Current Assets (in dollars)

Cash: 500,000

Accounts receivable: 600,000

Inventory: 950,000

Prepaid expenses: 50,000

Total Current Assets:2,100,000

Property, Plant and Equipment (in dollars)

Land: 250,000

Buildings, net of depreciation: 300,000

Equipment, net of depreciation: 800,000

Total Property, Plant and Equipment: 1,350,000

Total Assets: 3,450,000

Liabilities (in dollars)

Current Liabilities

Accounts payable: 700,000

Wages payable: 200,000

Interest payable: 25,000

Total Current Liabilities: 925,000

Long Term Liabilities

Notes Payable: 500,000

Bonds Payable: 450,000

Long Term Liabilities: 950,000

Total Liabilities: 1,875,000

Shareholders' Equity (in dollars)

Common stock: 500,000

Additional paid in capital: 100,000

Retained earnings: 975,000

Total Shareholder equity: 1,575,000

Total Liabilities and Equity: 3,450,000

Exhibit B
Jordan Corporation
Statement of Operations
Year Ended September 30, 2015

All figures in dollars

Sales: 6,000,000

Cost of goods sold: 3,600,000

Gross margin: 2,400,000

Selling and administrative expenses: 1,950,000

Operating income: 450,000

Interest expense: 50,000

Income before taxes: 400,000

Income taxes: 100,000

Net income: 300,000

Classify each of the above below as a liquidity, assetmanagement, financial leverage or profitability measure.

Quick (Acid Test) ratio

Current ratio

Accounts payable period

Collection period

Inventory turnover

Total debt to total assets

Interest coverage

Operating income margin

Net income margin

Return on assets

Return on equity

3. YouWin! manufacturers and sells custom wooden trophies. Eachof the company’s two divisions, production and sales, has a managerwho is responsible for all costs in his/her division. The followingare selected costs from YouWin!:

Wood

Brass ornamentation

Engraving materials

Adhesive for trophy production

Salary of sales staff

Wages of machine operators

Wages of factory custodial staff

Production manager’s salary

Rent and insurance of factory building

Rent on headquarters building

Engraving machine

Electricity for factory building

Depreciation of office equipment

Maintenance on engraving machines

For each cost listed fill in the following chart. If a definitedistinction cannot be made for any category, indicate why and whatadditional information would be needed before classification can bemade.

Item Product or Period Direct or Indirect Variable, Fixed orMixed Controllable orUncontrollable (from view of Production Manager)

4. Gladnish Manufacturing Company operates two shifts ofworkers. Day workers are paid $12 per hour; evening workers arepaid a shift premium of 20%. Overtime premiums are 50% above day orevening wages. For August 2009 the following factory payrollinformation is available:

Total hours worked during the month (70% by day, 30% byevening): 18,000 hours

Overtime hours worked during the month (only by day workers):1,000

What were the total wages paid to employees during themonth?

Of the amount paid in Part A, how much would be considereddirect labor cost?

Of the indirect labor cost, how much is for shift premiums andhow much is for overtime premiums?

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Jamar Ferry
Jamar FerryLv2
28 Sep 2019

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