24-3A (Static) Applying payback period, accounting rate of return, and net present value LO P1, P2, P3 Garcia Company can invest in one of two alternative projects. Project Y requires a $360,000 initial investment for new machinery with a four-year life and no salvage value. Project Z requires a $360,000 initial investment for new machinery with a three-year life and no salvage value. The two projects yield the following annual results. Cash flows occur evenly within each year. (PV of $1. FV of $1, PVA of $1, and EVA of S1) (Use appropriate factor(s) from the tables provided.) Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery selling, general, and administrative expenses Income Required: 1. Compute each project's annual net cash flows, Project Y $400,000 Project Z $ 500,000 190,000 200,000 120,000 50,000 90,000 50,000 $ 70,000 $ 130,000 2. Compute each project's payback period. If the company bases investment decisions solely on payback period, which project will it choose? 3. Compute each project's accounting rate of return. If the company bases investment decisions solely on accounting rate of return. which project will it choose? 4. Compute each project's net present value using 8% as the discount rate. If the company bases investment decisions solely on net present value, which project will it choose? Required 1 Required 2 Required 3 Required 4 Compute each project's annual net cash flows. Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling general, and administrative expenses Income Net cash flow Project Y Project Z Income Cash Flow Income Cash Flow $ 400,000 $ 400,000 $ 500,000 $ 500,000 190,000 190,000 200,000 200,000 90,000 120,000 50,000 50,000 50.000 50,000 $ 70,000 S 130.000 $ 160,000 250,000 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 31 Required 4 nt Compute each project's payback period. If the company bases investment decisions solely on payback period, which project will it choose? ences Project Y Project Z Numerator: Payback Period Denominator: the company bases investment decisions solely on payback period, which project will it choose? Payback period present value, which project Will Complete this question by entering your answers in the tabs below. ok Required 1 Required 2 Required 34 Required 4 ences Compute each project's accounting rate of return. If the company bases investment decisions solely on accounting rate of return, which project will it choose? Project Y Project 2 Accounting Rate of Return Numerator: Denominator: If the company bases investment decisions solely on accounting rate of return, which project will it choose? Accounting rate of return 0 0 Required 1 Required 2 Required 3 Required 4 Compute each project's net present value using 8% as the discount rate. If the company bases investment decisions solely on net present value, which project will it choose? (Do not round intermediate calculations. Round your present value factor to 4 decimals and final answers to the nearest whole dollar.) Project Y Years 1-4 rices Net Cash Flows Present Value of Present Value of Annuity at 8% Net Cash Flows Present Value of 1 Net present value Project Z Net Cash Flows Present Value of Annuity at 8% Years 1-3 S Net present value If the company bases investment decisions solely on net present value, which project will it choose? < Required 3 Net Cash Flows