Question
Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $236,000. Project 2 requires an initial investment of $150,000.
Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $236,000. Project 2 requires an initial investment of $150,000.
| Annual Amounts | Project 1 | Project 2 |
|---|---|---|
| Sales of new product | $ 164,000 | $ 144,000 |
| Expenses | ||
| Materials, labor, and overhead (except depreciation) | 81,000 | 48,000 |
| DepreciationMachinery | 36,000 | 34,000 |
| Selling, general, and administrative expenses | 24,000 | 36,000 |
| Income | $ 23,000 | $ 26,000 |
(a) Compute each projects annual net cash flow. (b) Compute payback period for each investment.
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International Accounting
Authors: Frederick D. Choi, Gary K. Meek
6th edition
131588141, 978-0131588141
