Problem 1 Capital Budgeting Sam\'s Structures desires to buy a new crane and acc

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Problem 1 Capital Budgeting

Sam's Structures desires to buy a new crane and accessories to help move and install modular buildings. The machine sells for $750,000 and requires working capital of $100,000. Its estimated useful life is six years and it will have a salvage value of $175,600. Recovery of working capital will be $100,000 at the end of its useful life. Annual cash savings from the purchase of the machine will be $200,000.

You are required to:

a.   Compute the net present value at a 12% required rate of return.

b.   Compute the internal rate of return.

c.   Determine the payback period of the investment

Problem 2 Statement of Cash Flows

The financial statements of Prosperous Company appear below. All are in thousand Rupiahs. You are also provided with the following additional data:

1.     Dividends declared and paid were Rp1.400.000.000

2.     The number of common stock outstanding is 1,000,000 shares.

3.     During the year, equipment was sold for Rp1.200.000.000 cash. This equipment cost Rp2.800.000.000 originally and had a book value of Rp1.200.000.000 at the time of sale.

4.     All depreciation expense is in the selling expense category.

5.     All sales and purchases are on account.

6.     Accounts payable pertain to merchandise suppliers.

7.     All operating expenses except for depreciation were paid in cash.

You are required to:

a.     Prepare a statement of cash flows for Nixon Company using the direct method.

b.     Prepare the reconciliation of net income to cash flow from operating activities.

Problem 3 Financial Statement Analysis

Based on the information provided in problem 2 above, you are asked to conduct financial statement analysis in the aspects of:

a.     Liquidity

b.     Solvency

c.     Profitability

Explanation / Answer

Please rate 5 star and contact for any help needed Initial Investment      85,000 $75,000 + $10,000 Annual Benefits (Year 1 to 5)      20,000 Given Terminal Cash Flow (Year 6)      47,560 $20,000 + $17,560 + $10,000 a CF PV Factor PV Annual Benefits (Year 1 to 5)      20,000 3.6048      72,096 Terminal Cash Flow (Year 6)      47,560 0.5066      24,094 PV of Benefits      96,190 Initial Investment    (85,000) Net Present Value      11,190 b Year CF 0    (85,000) 1      20,000 2      20,000 3      20,000 4      20,000 5      20,000 6      47,560 IRR 16.00% c Initial Investment      85,000 / Annual Benefits (Year 1 to 5)      20,000 Payback Period           4.25 years

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