ACC202 Week 4 Homework Connect Question 5

Required information [The following information applies to the questions displayed below.] Most Company has an opportunity to invest in one of two new projects. Project Y requires a $305,000 investment for new machinery with a five-year life and no salvage value. Project Z requires a $305,000 investment for new machinery with a four-year life and no salvage value. The two projects yield the following predicted annual results. The company uses straight-line depreciation, and cash flows occur evenly throughout each year. (PV of $1, FV of $1, PVA of $1, and EVA of $1) (Use appropriate factor(s) from the tables provided.) Project Y Project Z Sales $380, 000 $304, 000 Expenses Direct materials 53, 200 38,000 Direct labor 76,000 45, 600 Overhead including depreciation 136, 800 136, 800 Selling and administrative expenses 27,000 27,000 Total expenses 293,000 247, 400 Pretax income 87,000 56,600 Income taxes (328) 27, 840 18, 112 Net income $ 59, 160 $38, 488 3. Compute each project's accounting rate of return. Accounting Rate of Return Choose Numerator: 1 Choose Denominator: Accounting Rate of Return = Accounting rate of return Project Y Project Z