Garcia Co. 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. Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Income Project Y Project Z $400,000 $500,000 190,000 200,000 90,000 120,000 50,000 50,000 $ 70,000 $130,000 Problem 26-4A Applying net present value and profitability index P3 Rowan Co. is considering two alternative investment projects. Each requires a $250,000 initial investment. Project A is expected to generate net cash flows of $60,000 per year over the next six years. Project B is expected to generate net cash flows of $50.000 per year over the next seven years. Management requires an 8% rate of return on its investments.