1.) Planning for capital investments is an important function of management.You are responsible for considering purchasing a new exhibit. It would cost $136,000 and have an estimated useful life of 5 years. The salvage value is $70,000. It is expected to increase net annual cash flows by $25,000. The borrowing rate is 8%. The cost of capital is 10%.Calculate the net present value of this project. (1) Explain the pros and cons of using this method to evaluate a capital expenditure and (2) show all computations required to arrive at the correct solution.2.)To adequately plan for the success of the business a budget must be developed. (1) Indicate the benefits of budgeting and (2) state the essentials of effective budgeting.Include textbook page references to identify where the correct answer was located.3.)Financial statement analysis is used by investors, creditors and managers of business to evaluate the operation and health of the business. This information is in part the basis for decision making. (1) Explain how to use the Statement of Cash Flows to understand the operation of the business and (2) provide an example of how the results of this analysis could be used to make business decisions.4.)There are three different forms of business; sole-proprietor, partnership and corporation. (1) Explain why a corporation’s taxation may not be considered a positive and (2) as a stockholder explain why a stockholder would want to own common stock.5.) Ajax Company has a unit selling price of $520, variable costs per unit of $286, and fixed costs of $187,000. Compute the break-even point in units using (a) the mathematical equation and (b) contribution margin per unit.(1) Explain how the determination of the break-even point is to be performed and (2) Show the computations of both methods required to arrive at the correct answers. 6.)Barstock Manufacturing incurs costs of $7.50 ($4.50 variable and $3 fixed) in making a sub-assembly part for its finished product.A supplier offers to make 10,000 of the assembly part at $5 per unit. If the order is accepted, Barstock will save all variable costs but no fixed costs.Prepare an analysis showing the total cost saving, if any, Barstock will realize by buying the part.(1) Explain how the analysis is to be performed and (2) Show all computations required to arrive at the correct answer.
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