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Bowman Corporation is considering an investment in special-purpose

equipment to enable the company to obtain a four-year government contract for the manufacture of a special item. The equipment costs $202,000 and would have no salvage value when the contract expires at the end of the four years. Estimated annual operating results of the project are as follows.
  
                Revenue from contract sales         $ 321,000   Expenses other than depreciation $ 220,000           Depreciation (straight-line basis)   50,500       270,500   Increase in net income from contract work         $ 50,500  
   

All revenue and all expenses other than depreciation will be received or paid in cash in the same period as recognized for accounting purposes.

 

a. Payback period. (Round pay back period year to 2 decimal places.)

b. Return on average investment. (Round your percentage answer to 1 decimal place (i.e., 0.123 to be entered as 12.3).)

c. Net present value of the proposal to undertake contract work, discounted at an annual rate of 8 percent. (Refer to the annuity table in Exhibit 26-4.) (Round your "PV factors" to 3 decimal places.)

 





a.Payback period= how many years?
b.Return on average investment= what %?
c.Net present value =

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