Roberts iii corporation is considering an investment in

Assignment Help Accounting Basics

Reference no: EM13573380

Roberts III 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 $188,000 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			$	302,000
Expenses other than depreciation	$	208,000
Depreciation (straight-line basis)		55,000		(263,000	)

Increase in net income from contract work			$	39,000

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.	Compute the payback period for Bowman's proposal to undertake the contract work:

Payback period

years

b.	Compute the return on average investment for Bowman's proposal to undertake the contract work.

Return on average investment

c.	Compute the net present value of the proposal to undertake contract work, discounted at an annual rate of 12 percent.

Net present value

Reference no: EM13573380

Questions Cloud

Suppose you find that prices of stocks before large : suppose you find that prices of stocks before large dividend increases show on average consistently positive abnormal

You are interested in creating a portfolio of two stocks - : you are interested in creating a portfolio of two stocks - coca cola and texas utilities. over the last decade an

All sales were on account net cash provided by operating : the comparative statements of osborne company are presented here.osborne company income statements for the years ended

Jacks lumber yard receives 8000 large trees each period : jacks lumber yard receives 8000 large trees each period that it subsequently processes into rough logs by stripping off

Roberts iii corporation is considering an investment in : roberts iii corporation is considering an investment in special-purpose equipment to enable the company to obtain a

For the activity level of 2700 units compute a the total : corio corporation reports that at an activity level of 2600 units its total variable cost is 117390 and its total fixed

Clover dairys stock has a beta of 080 ifthe risk-free rate : parr papers stock has a beta of 1.40 and its required returnis 13.00. clover dairys stock has a beta of 0.80. ifthe

Confer company produces two different metal components used : confer company produces two different metal components used in medical equipment. the company has three processes

Estimate the average annual return you would have made on : unicom is a regulated utility serving northern illinois. the following table lists the stock prices and dividends on

User Account

All Pages