Question 24

1. A company had the following results last year: sales, $700,000; return on investment, 28%; and margin, 8%. The average operating assets last year were:

   Answer

   		$540,000.
   		$2,500,000
   		$2,450,000.
   		$200,000.

Question 25

1. I DID NOT MISS MORE THAN ONCE DURING THIS SESSION.

   Answer

   		TRUE
   		FALSE
   		I CAN'T REMEMBER
   		I MISSED A LOT

Question 26

1. Flynn Company reported a net loss of $30,000 for the year ended December 31, 2011. During the year, accounts receivable decreased $15,000, merchandise inventory increased $24,000, accounts payable increased by $30,000, and depreciation expense of $15,000 was recorded. During 2011, operating activities

   Answer

   	A.	provided net cash of $24,000.
   	B.	used net cash of $24,000.
   	C.	used net cash of $6,000.
   	D.	provided net cash of $6,000.

Question 27

1. All of the following statements about the annual rate of return method are correct except that it

   Answer

   	A.	compares the annual rate of return to management's minimum rate of return.
   	B.	indicates the profitability of a capital expenditure.
   	C.	does not consider the time value of money.
   	D.	ignores the salvage value of an investment.

Question 28

1. A project has an annual rate of return of 15%. The project cost $80,000, has a 5-year useful life, and no salvage value. Straight-line depreciation is used. The annual net income, exclusive of depreciation, was

   Answer

   	A.	$12,000.
   	B.	$31,800.
   	C.	$22,000.
   	D.	$28,000.

Question 29

Johnson Corp. has an 8% required rate of return. It's considering a project that would provide annual cost savings of $30,000 for 5 years. The most that Johnson would be willing to spend on this project is

	Present Value	PV of an Annuity
Year	of 1 at 8%	of 1 at 8%

1	.926	.926
2	.857	1.783
3	.794	2.577
4	.735	3.312

5

.681

3.993

Answer

	A.	$119,790.
	B.	$75,546.
	C.	$20,430.
	D.	$99,360.