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Part 2 - Subjective Marks: 40 Attempt any 4 four Questions Q2. Acme Plumbing Company sells plumbing fixtures on terms of 2/10, net 30. Its financial statements over the last two years are as follows: 20X1 20X2 Cash $ 30,000 $ 20,000 Accounts receivable 200,000 260,000 Inventory 400,000 480,000 Net fixed assets 800,000 800,000 $1,430,000 $1.560,000 Accounts payable $ 230,000 $ 300,000 Accruals 200,000 210,000 Bank loan, short term 100,000 100,000 Long-term debt 300,000 300,000 Common stock 100,000 100,000 Retained earnings 500,000 550,000 $1,430,000 $1,560,000 Sales $4,000,000 $4,300,000 Cost of goods sold 3,200,000 3,600,000 Net profit 300,000 200,000 Using the 4 types of ratios, analyze the company's financial condition and performance over the last two years. Are there any problems? (10) Q3. The City of San Jose must replace a number of its concrete-mixer trucks with new trucks. It has received two bids and has evaluated closely the performance characteristics of the various trucks. The Rockbuilt truck, which costs $74,000, is top-of- the-line equipment. The truck has a life of eight years, assuming that the engine is rebuilt in the fifth year. Maintenance costs of $2,000 a year are expected in the first four years, followed by total maintenance and rebuilding costs of $13,000 in the fifth year. During the last three years, maintenance costs are expected to be $4,000 a year. At the end of eight years the truck will have an estimated scrap value of $9,000. A bid from Bulldog Trucks, Inc., is for $59,000 a truck. Maintenance costs for the truck will be higher. In the first year they are expected to be $3,000, and this amount is expected to increase by $1,500 a year through the eighth year. In the fourth year the engine will need to be rebuilt, and this will cost the company $15,000 in addition to maintenance costs in that year. At the end of eight years the Bulldog truck will have an estimated scrap value of $5,000. What are the relevant cash flows related to the trucks of each bidder? Ignore tax considerations because the City of San Jose pays no taxes. (10) Page 2 of 3