Winett Corporation is considering an investment in specialpurpose equipment to enable the company to obtain a fouryear municipal contract. The equipment costs $ 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 purposes. Compute the following for Winetts proposal to undertake this contract.
a Payback period.
b Return on average investment. Round your percentage answer to decimal place ie to be entered as
c Net present value of the proposal to undertake contract work, discounted at an annual rate of percent. Refer to the annuity table in Exhibit Round your PV factors" to decimal places.
