Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Golden Flights, Inc., is considering buying some specialized machinery that would enable the company to obtain a six-year government contract for the design and engineering

Golden Flights, Inc., is considering buying some specialized machinery that would enable the company to obtain a six-year government contract for the design and engineering of a futuristic plane. The machinery costs $975,000 and must be destroyed for security reasons at the end of the six-year contract period. The estimated annual operating results of the project are as follows:

Revenue from sales under the contract $975,000

Expenses other than depreciation $560,000

Depreciation (straight-line basis) $162,500

Increase in net income from government contract $252,500

All revenue from the contract and all expenses (except depreciation) will be received or paid in cash in the same period as recognized for accounting purposes. You are to compute the following three factors for this project:

(a) Payback period: __________ years

(b) Return on average investment: __________%

(c) Net present value of the investment in this machinery, discounted at an annual rate of 12% (an annuity table shows that the present value of $1 received annually for six years discounted at 12% is 4.111): $__________

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing Information Systems A Comprehensive Reference Guide

Authors: Jack J. Champlain

1st Edition

0471168904, 978-0471168904

More Books

Students also viewed these Accounting questions

Question

5. Prepare for the role of interviewee

Answered: 1 week ago

Question

6. Secure job interviews and manage them with confidence

Answered: 1 week ago