Alligood Equipment Corporation sold a precision tool machine with computer controls to Kaui Corporation for $400,000 on January 2 and agreed to take payment nine months later on October 2. Assuming that the prevailing annual interest rate for such a transaction is 16 percent compounded quarterly, what is the actual sale (purchase) price of the machine tool? (Hint: Use Table 1 in Appendix C.)
Negotiating the sale of a Business Knight Enterprises, Inc., is attempting to sell the business to Bosh Corporation. The company has assets of $1,800,000, liabilities of $1,600,000, and stockholders' equity of $200,000. Both parties agree that the proper rate of return to expect is 12 percent; however, they differ on other assumptions. Knight believes that the busi- ness will generate at least $200,000 per year of cash flows for 20 years. Bosh thinks that $160,000 in cash flows per year is more reasonable and that only 10 years in the future should be considered. Determine the range for negotiation by computing the present value of Knight's offer to sell and of Bosh's offer to buy. (Hint: Use Table 2 in Appendix C.)
Measuring short-term Liquidity. In 2013, Copia Company had current assets of $155,000 and current liabilities of $100,000, of which accounts payable were $65,000. Cost of goods sold was $425,000, merchandise inventory increased by $40,000, and accounts payable were $55,000 in the prior year. In 2014, Copia had current assets of $210,000 and current liabilities of $160,000, of which accounts payable were $75,000. Cost of goods sold was $475,000, and merchandise inventory decreased by $15,000. Calculate Copia's working capital, payables turnover, and days' payable for 2013 and 2014. Assess Copia's liquidity and cash flows in relation to the change in payables turnover from 2013 to 2014. (Round to one decimal place.)
Text book: Principles of Accounting By Belverd Needles, Marian Powers, Susan Crosson.