accounting 426

The Bowman Corporation is considering an investiment in a special purpose equipment to allow the company to obtain a government contract for the manufacture of a special item. The equipment cost 390,000 and would have no salvage value when the contract expires at the end of the 4 years. The estimated annual operating results are as follows.

Revenue from contract sales: $324,000

Expenses other than Depreciation:$221,000

Depreciation (Straight Line Basis) $77,250 $298,250

Increase in Net Income from contract work: $25,750

Question 1:

  • Identify payback Period? round two decimal places
  • Return on Average Investment (%) ? round 1 decimal place
  • Net Present Value? round PV Factors 3 place.

*SHOW WORK*

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