Solution Manual For Contemporary Engineering Economics, 5th Edition

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Page | 1Chapter 2 Understanding Financial StatementsFinancial Statement2.1(a)Current assets = $150,000 + $200,000 + $150,000 + $50,000 + $30,000 =$580,000Current liabilities = $50,000 + $100,000 + $80,000 = $230,000Working capital = $580,000 - $230,000 = $350,000Shareholder’s equity = $100,000 + $150,000 + $150,000 + $70,000 =$470,000(b) EPS = $500,000/10,000 = $50 per share(c) Par value = $15; capital surplus = $150,000/10,000 = $15;Market price = $15 + $15 = $30 per share2.2(a)Working capital = Current assets – Current liabilities;Working capital requirements = Changes in current assets – Changes incurrent liabilitiesWC req. = (+$100,000 - $20,000) – (+$30,000 - $40,000) = $90,000(b)Taxable income = $1,500,000 - $650,000 - $150,000 - $20,000 = $680,000(c)Net income = $680,000 - $272,000 = $408,000(d)Net cash flow:A.Operating activities = net income + depreciation – W.C. required =$408,000 + $200,000 - $90,000 = $518,000B.Investing activities = equipment purchase = ($400,000)C.Financing activities = borrowed funds = $200,000D.Net cash flow = $518,000 - $400,000 + $200,000 = $318,0002.3(a)168ROE21%800A==240ROE60%400B==

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