Q21.

Q23.

Helicopter Gear is planning to expand its product line, which requires investment of $391,500 in special-purpose machinery. The machinery has a useful life of five years and no salvage value. The estimated annual results of offering the new products are as follows: 21 Revenue Expenses (including straight-line depreciation) Increase in net income $ 523,500 (498,000) $ 25,500 All revenue from the new products and all expenses (except depreciation) will be received or paid in cash in the same period as recognized for accounting purposes. eBook The payback period for this proposed investment is: Multiple Choice 3.8 years. 5.0 years. O 1.9 years. o 7.7 years. 23 The Terme Corporation is contemplating the purchase of new equipment, which may potentially increase revenues by 20%. Currently, sales are $840,000 per year and cost of sales are 55% of sales. The equipment is expected to last for 5 years with no residual value. The cash outflow expected at the beginning of the year is $362,000. By how much would Terme's annual gross profit increase if the investment is undertaken? eBook Multiple Choice $840,000 $168,000 $75,600 $92,400