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a. Payback period. 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 10 percent. (Refer to the annuity table in Exhibit 26-4.) (Round your "PV factors" to 3 decimal places.)

a. Payback period. 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 10 percent. (Refer to the annuity table in Exhibit 26-4.) (Round your "PV factors" to 3 decimal places.)

Principles of Accounting Volume 1
Principles of Accounting Volume 1
19th Edition
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax
Chapter11: Long-term Assets
Section: Chapter Questions
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Winett Corporation is considering an investment in special-purpose equipment to enable the company to obtain a four-year municipal contract. The equipment costs $222,000 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 (straight-line basis) Increase in net income from contract work $211,000 55,500 All revenue and all expenses other than depreciation will be received or paid in cash in the same period as recognized for accounting purposes. Compute the following for Winett's proposal to undertake this contract. a. Payback period b. C. a. Payback period. 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 10 percent. (Refer to the annuity table in Exhibit 26-4.) (Round your "PV factors" to 3 decimal places.) Return on average investment Net present value $322,000 266,500 $ 55,500 years %
Transcribed Image Text:Winett Corporation is considering an investment in special-purpose equipment to enable the company to obtain a four-year municipal contract. The equipment costs $222,000 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 (straight-line basis) Increase in net income from contract work $211,000 55,500 All revenue and all expenses other than depreciation will be received or paid in cash in the same period as recognized for accounting purposes. Compute the following for Winett's proposal to undertake this contract. a. Payback period b. C. a. Payback period. 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 10 percent. (Refer to the annuity table in Exhibit 26-4.) (Round your "PV factors" to 3 decimal places.) Return on average investment Net present value $322,000 266,500 $ 55,500 years %
EXHIBIT 26-4 Present Value of a $1 Annuity Receivable Each Period for n Periods Number of Periods (n) 1 2 3 4 5 6 7 S 9 10 20 24 36 1% Present Value of $1 to Be Received Periodically for n Periods Discount Rate 0.990 1.970 2.941 3.902 4.853 5.795 6.728 7.652 8.566 9.471 112% 5% 0.985 0.952 1.956 1.859 2.912 2.723 3.854 3.546 4.783 4.329 5.697 5.076 6.598 5.786 7.486 6.463 8.361 7.108 9.222 7.722 18.046 17.169 12.462 21.243 20.030 13.799 30.108 27.661 16.547 6% 0.943 1.833 2.673 3.465 4.212 4.917 5.582 6.210 6.802 7.360 11.470 12.550 14.621 8% 10% 0.926 0.909 1.783 1.736 2.577 2.487 3.312 3.170 3.993 3.791 4.623 4.355 5.206 4.868 5.747 5.335 6.247 5.759 6.710 6.145 9.818 8.514 10.529 8.985 11.717 9.677 12% 0.893 1.690 2.402 3.037 3.605 4.111 4.564 4.968 5.328 5.650 7.469 7.784 8.192 15% 0.870 1.626 2.283 2.855 3.352 3.784 4.160 4.487 4.772 5.019 6.259 6.434 6.623 20% 0.833 1.528 2.106 2.589 2.991 3.326 3.605 3.837 4.031 4.192 4.870 4.937 4.993
Transcribed Image Text:EXHIBIT 26-4 Present Value of a $1 Annuity Receivable Each Period for n Periods Number of Periods (n) 1 2 3 4 5 6 7 S 9 10 20 24 36 1% Present Value of $1 to Be Received Periodically for n Periods Discount Rate 0.990 1.970 2.941 3.902 4.853 5.795 6.728 7.652 8.566 9.471 112% 5% 0.985 0.952 1.956 1.859 2.912 2.723 3.854 3.546 4.783 4.329 5.697 5.076 6.598 5.786 7.486 6.463 8.361 7.108 9.222 7.722 18.046 17.169 12.462 21.243 20.030 13.799 30.108 27.661 16.547 6% 0.943 1.833 2.673 3.465 4.212 4.917 5.582 6.210 6.802 7.360 11.470 12.550 14.621 8% 10% 0.926 0.909 1.783 1.736 2.577 2.487 3.312 3.170 3.993 3.791 4.623 4.355 5.206 4.868 5.747 5.335 6.247 5.759 6.710 6.145 9.818 8.514 10.529 8.985 11.717 9.677 12% 0.893 1.690 2.402 3.037 3.605 4.111 4.564 4.968 5.328 5.650 7.469 7.784 8.192 15% 0.870 1.626 2.283 2.855 3.352 3.784 4.160 4.487 4.772 5.019 6.259 6.434 6.623 20% 0.833 1.528 2.106 2.589 2.991 3.326 3.605 3.837 4.031 4.192 4.870 4.937 4.993
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