Accounting Payback Period NPV & Return on Average Investment Questions

Question Description

Can you help me understand this Accounting question?

The Bowman Corporation is considering an investiment in a special purpose equipment to allow the company to obtain a government contract for the manufacture of a special item. The equipment cost 390,000 and would have no salvage value when the contract expires at the end of the 4 years. The estimated annual operating results are as follows.

Revenue from contract sales:                                  $324,000

Expenses other than Depreciation:$221,000

Depreciation (Straight Line Basis)  $77,250            $298,250

Increase in Net Income from contract work:             $25,750

Question 1:

  • Identify payback Period? round two decimal places 
  • Return on Average Investment (%) ? round 1 decimal place
  • Net Present Value?  round PV Factors 3 place.