In order to increase production capacity, Gunning Industries is considering replacing

an existing production machine with a new technologically improved machine

effective January 1. The following information is being considered by Gunning
Industries.

 The new machine would be purchased for $160,000 in cash. Shipping,

installation, and testing would cost an additional $30,000.
 The new machine is expected to increase annual sales by 20,000 units at a
sales price of $40 per unit. Incremental operating costs are comprised of $30
per unit in variable costs and total fixed costs of $40,000 per year.
 The investment in the new machine will require an immediate increase in
working capital of $35,000.
 Gunning uses straight-line depreciation for financial reporting and tax
reporting purposes. The new machine has an estimated useful life of five
years and zero salvage value.
 Gunning is subject to a 40 percent corporate income tax rate.

Gunning uses the net present value method to analyze investments and will employ
the following factors and rates.

The overall discounted cash flow impact of Gunning Industries' working capital
investment for the new production machine would be
$13,265.

$(13,265).

$(35,000).

$21,735
Birch Corporation had net income for the year of $101,504 and a simple capital
structure consisting of the following common shares outstanding.

Assume Birch Corporation issued a 20 percent stock dividend on August 1st. In this
case, earnings per share (rounded to the nearest cent) were
$2.72.

$2.67.

$2.87.

$2.41

Maxgo Company is considering replacing its current computer system. The new
system would cost Maxgo $60,000 to have it installed and operational. It would have
an expected useful life of four years and an estimated salvage value of $12,000. The
system would be depreciated on a straight-line basis for financial statement reporting
purposes and use an accelerated depreciation method for income tax reporting
purposes. Assume that the percentages of depreciation for tax purposes are 25%,
40%, 20%, and 15% for the four-year life of the new computer.

Maxgo's current computer system has been fully depreciated for both financial
statement and income tax reporting purposes. It could be used for four more years
but not as effectively as the new computer system. The old system currently has an
estimated salvage value of $8,000 and will have an estimated salvage value of
$1,000 in four years. It is estimated that the new system will save $15,000 per year in
operating costs. Also, because of features of the new software, working capital could
immediately be reduced by $3,000 if the new system is purchased. Maxgo expects to
have an effective income tax rate of 30 percent for the next four years.

Assuming that Maxgo Company purchases the new system, determine the estimated
net cash flow for the fourth (last) year of using the new system.
$21,600

$17,900

$18,600

$20,900
Clauson Inc. grants credit terms of 1/15, net 30 and projects gross sales for next year
of $2,000,000. The credit manager estimates that 40 percent of their customers pay
on the discount date, 40 percent on the net due date, and 20 percent pay 15 days
after the net due date. Assuming uniform sales and a 365-day year, what is the
projected days sales outstanding (rounded to the nearest whole day)?
30 days

27 days

24 days

20 days