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Hupta Corporation (Use this given for Qrusstion 17) for stion 17) 2005 Net income s 6,000 Dividends S 2.000 Total assets-12/31 05 $50,000 Total liabilities-12/31 05s $20,000 Number of shares outstanding 1.000 Cost of equity Net income is expected to increase by 10% for the next year, and dividend payout ratio is expected to remain constant. After 2006, residual earnings are expected to decrease to zero. Using the earnings-based valuation method, what is the value per share of Hupta stock as of 12/31/05 A. $33.60 B. S33.27 C. S32.73 D. S30.00 10% 17. Two companies, A and B, have the same ROEs, but Company A has a higher residual income. Which of the following would explain this, all else equal? A. Company A is riskier than Company B B. Company A has higher expected future growth C. Company A has greater net book value. D. Company A has lower ROA 18. Which of the following would require an adjustment in the computation of cash flow from operations using the indirect method? I. Sale of machinery for $50,000 with a net book value of $35,000 II. Purchase of supplies for cash III. Remittance by customer in payment of goods purchased this accounting period IV. Acquisition of land with simultancous issuance of long-term note 19. A. I B. I and II C. I and III D. IV An increase in accounts payable would be considered: A. a source of cash. B. a use of cash. C. an adjusting entry. D. a noncash charge to income 20

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