Winett Corporation is considering an investment in special-purpose equipment to enable the company to obtain afour-year municipal contract. The equipment costs $222,000 and would have no salvage value when the contractexpires at the end of four years. Estimated annual operating results of the project are as follows.Revenue from contract sales.Expenses other than depreciationDepreciation (straight-line basis)Increase in net income from contract work$211,00055,500All revenue and all expenses other than depreciation will be received or paid in cash in the same period asrecognized for accounting purposes. Compute the following for Winett's proposal to undertake this contract.a. Payback periodb.C.a. Payback period.b. Return on average investment. (Round your percentage answer to 1 decimal place (i.e., 0.123 to be entered as12.3).)c. Net present value of the proposal to undertake contract work, discounted at an annual rate of 10 percent. (Referto the annuity table in Exhibit 26-4.) (Round your "PV factors" to 3 decimal places.)Return on average investmentNet present value$322,000266,500$ 55,500years% EXHIBIT 26-4 Present Value of a $1 Annuity Receivable Each Period for nPeriodsNumber ofPeriods(n)1234567S9102024361%Present Value of $1 to Be Received Periodically for n PeriodsDiscount Rate0.9901.9702.9413.9024.8535.7956.7287.6528.5669.471112%5%0.9850.9521.9561.8592.9122.7233.8543.5464.7834.3295.6975.0766.5985.7867.4866.4638.3617.1089.2227.72218.046 17.169 12.46221.243 20.03013.79930.10827.66116.5476%0.9431.8332.6733.4654.2124.9175.5826.2106.8027.36011.47012.55014.6218%10%0.9260.9091.783 1.7362.5772.4873.3123.1703.993 3.7914.623 4.3555.206 4.8685.7475.3356.247 5.7596.710 6.1459.8188.51410.529 8.98511.717 9.67712%0.8931.6902.4023.0373.6054.1114.5644.9685.3285.6507.4697.7848.19215%0.8701.6262.2832.8553.3523.7844.1604.4874.7725.0196.2596.4346.62320%0.8331.5282.1062.5892.9913.3263.6053.8374.0314.1924.8704.9374.993

Capital budgeting is a process a business uses to evaluate many potential projects by using…

Answered: a. Payback period. b. Return on average…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Cc. 174.
7b. Compute the present value of a $100 annual annuity for the following combination of rates and time periods: (Round your answers to the nearest cent. Round PVA factors to 4 decimal places.) d. r = 4%, t = 20 years PV of annuity $
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i. Find the annual payments for an ordinary annuity and an annuity due for 12 years with a PV of $1,000 and an interest rate of 10%. Round your answers to the nearest cent. Annual payment for ordinary annuity: $ Annual payment for annuity due: $ j. Find the PV and the FV of an investment that makes the following end-of-year payments. The interest rate is 10%. Year 1 Payment $100 2 $300 $500 3 Round your answers to the nearest cent. PV of investment: $ FV of investment: $ k. Five banks offer nominal rates of 9% on deposits, but A pays interest annually, B pays semiannually, C pays quarterly, D pays monthly, and E pays daily. Assume 365 days in a year. 1. What effective annual rate does each bank pay? If you deposit $3,000 in each bank today, how much will you have in each bank at the end of 1 year? 2 years? Round your answers to two decimal places. EAR FV after 1 year FV after 2 years Nominal rate $ $ Payment A A % B $ $ % B B C % $ 2. If the TVM is the only consideration, what nominal…
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