Exercise 24-1 (Algo) Payback period, equal cash flows, and depreciation adjustment LO P1

Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $245,000. Project 2 requires an initial investment of $175,000.

Annual Amounts	Project 1	Project 2
Sales of new product	$ 144,000	$ 124,000
Expenses
Materials, labor, and overhead (except depreciation)	76,000	43,000
DepreciationMachinery	31,000	29,000
Selling, general, and administrative expenses	19,000	31,000
Income	$ 18,000	$ 21,000

(a) Compute each projects annual net cash flow. (b) Compute payback period for each investment.

Complete this question by entering your answers in the tabs below.

Required A

Required B

Compute each projects annual net cash flow.

A

Annual Amounts	Project 1		Project 2
	Income	Cash Flow	Income	Cash Flow
Sales of new product	$144,000		$124,000
Expenses
Materials, labor, and overhead (except depreciation)	76,000		43,000
DepreciationMachinery	31,000		29,000
Selling, general, and administrative expenses	19,000		31,000
Income	$18,000		$21,000
Net cash flow

Compute payback period for each investment.

B

Payback Period
	Numerator:	/	Denominator:
		/		=	Payback period
Project 1				=
Project 2				=