# Ratios, Scattergraph and Net Present Value Computation

A corporation has the following balance sheet items for the year ending December 31, 2011:

Cash $15,000

Accounts Receivable 20,000

Inventory 45,000

Prepaid Expenses 10,000

Property Plant and Equipment 80,000

Total Assets $170,000

Accounts Payables 30,000

Long Term Notes Payable 70,000

Stockholders' Equity 70,000

Total Liabilities and Equity $170,000

The income statement for the year ending December 31, 2011 is as follows:

Sales $110,000

Cost of Goods Sold (50,000)

Gross Margin $ 60,000

Selling Expenses (20,000)

Administrative Expenses (10,000)

Interest Expenses ( 5,000)

Net Income $25,000

Calculate the current ratio

5.67

3

2.67

1.7

Calculate the acid test/quick ratio

1

2.67

3

5.67

Calculate the debt to equity ratio

1

1.43

.43

.17

Calculate the profit margin ratio

.23

4.4

.55

1.83

Calculate the times interest earned ratio

6

5

.2

22

A corporation is considering the purchase of a new equipment costing $90,000. The projected after-tax annual net income from the equipment is $3,600, after deducting $30,000 depreciation. Assume that revenue is to be received at each year-end, and the machine has a useful life of three years with zero salvage value. Management requires a 12% return on its investments. What is the net present value of this machine? (use tables on next page)

$60,444

$80,700

$(9,300)

$(88,560)

What is the estimated fixed costs based upon the scattergraph?

$300

$50

$225

$175