Garc$$a Company can invest in one of two alternative projects. Project Y requires a $$420,000$ initial investment for new machinery with a four$-$year life and no salvage value. Project Z requires a $$432,000$ initial investment for new machinery with a three$-$year life and no salvage value. The two projects yield the following annual results. Cash flows occur evenly within each year. $($PV of $$1,$ FV of $$1,$ PVA of $$1,$ and FVA of $$1)$

Note: Use appropriate factor$($s$)$ from the tables provided.

Annual Amounts Project Y Project Z

Sales of new product $ $430,000$ $ $530,000$

Expenses

Materials, labor, and overhead $($except depreciation$)196,000206,000$

Depreciation$$Machinery $105,000144,000$

Selling, general, and administrative expenses $56,00056,000$

Income $ $73,000$ $ $124,000$

Required:

Compute each project$$s annual net cash flows.

Compute each project$$s payback period. If the company bases investment decisions solely on payback period, which project will it choose?

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?

Compute each project$$s net present value using $7\%$ as the discount rate. If the company bases investment decisions solely on net present value, which project will it choose?