Question 1

An energy efficient air compressor will cost $30,000 installed and will require $1,000 worth of maintenance each year for its life of 10 years. Energy costs will be $6,000 per year. A standard air compressor will cost $25,000 and will require $500 worth of maintenance each year. Its energy costs will be $10,000 per year. At an interest rate of 12%, which one is preferable?

Question 2

Caprice Corporation is a wholesaler of industrial goods. Data regarding the store's operations follow:

Sales are budgeted at $390,000 for November, $400,000 for December, and $380,000 for January.

Collections are expected to be 55% in the month of sale, 43% in the month following the sale, and 2% uncollectible.

The cost of goods sold is 80% of sales.

The company desires an ending merchandise inventory equal to 35% of the cost of goods sold in the following month. Payment for merchandise is made in the month following the purchase.

The November beginning balance in the accounts receivable account is $74,000.

The November beginning balance in the accounts payable account is $261,000.

Required:

a.Schedule of Expected Cash Collections for November and December.

b.Merchandise Purchases Budget for November and December.