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MBA560 Financial and Managerial Accounting: Module 8 Test (2 Problems)




Question;Saint Leo University (Graduate;Business Studies);MBA560 Financial and Managerial;Accounting;Module 8 Test;Problem 1.;Creighton Company's balance sheet and income statement are provided;below;Creighton Company;Balance Sheet;December 31, 2012;Cash 21,000;Accounts receivable 24,000;Inventory 15,000;Plant and equipment, net of depreciation 144,000;Land held for future plant expansion;36,000;Total Assets 240,000;Liabilities and Stockholders' Equity;Accounts payable;18,000;Notes payable 30,000;Capital stock, no par;120,000;Retained earnings;72,000;Total Liabilities and stockholders' equity 240,000;Creighton Company;Balance Sheet;December 31, 2012;Sales 159,000;Less: variable costs;Manufacturing 31,000;Selling and administrative 25,000;Contribution margin 103,000;Less: Fixed costs;Manufacturing 31,000;Selling and administrative 22,500;Operating income;49,500;Required;1) Compute the margin, turnover, and return on investment for Creighton;Company;2) What is the advantage of expanding the ROI formula to measure margin;and turnover separately?;Problem 2.;Delta Company is evaluating two different capital investments, Project;X and Y. Either X or Y would cost $100,000, and the company cannot afford to do;both.;The company expects that Project X would provide net cash inflows of;$30,000 per year for 5 years.;For Project Y, the net cash inflows are expected to be as follows;Year Cash inflows;Year 1 22,000;Year 2 24,000;Year 3 30,000;Year 4 38,000;Year 5 40,000;Delta's cost of capital is 12%.;Required;1) Calculate the present value index for Project X and for Project Y.;2) Indicate whether each of the projects is an acceptable investment.;3) Which of the two projects;should Delta implement?


Paper#37671 | Written in 18-Jul-2015

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