Winett corporation is considering an investment in special purpose equipment to enable the company to obtain a four year municipal contract. The equipment cost and would have no salvage value when the contract expires at the end of four years. Estimated annual operating results of the project are as follows:
Revenue from contract sales
Expenses other than depreciation
Depreciation straightline basis
Increase in net income from contract work
All revenue and all expenses other than depreciation will be received or paid in cash in the same period as recognized for accounting purpose
Compute the following for Winetts proposal to undertake this contract:
A PAYBACK PERIOD
B Return on investment round your percentage answer to decimal place
C Net present value of the proposal to undertake contract work, discounted at an annual rate of percent refer to the table in exhibit round your PV factors to decimal places
