Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $135,000. Project 2 requires an initial investment of $98,000.

Annual Amounts	Project 1	Project 2
Sales of new product	$ 100,000	$ 80,000
Expenses
Materials, labor, and overhead (except depreciation)	65,000	32,000
DepreciationMachinery	20,000	18,000
Selling, general, and administrative expenses	8,000	20,000
Income	$ 7,000	$ 10,000

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

Compute each projects annual net cash flow.

Annual Amounts	Project 1		Project 2
	Income	Cash Flow	Income	Cash Flow
Sales of new product	$100,000		$80,000
Expenses
Materials, labor, and overhead (except depreciation)	65,000		32,000
DepreciationMachinery	20,000		18,000
Selling, general, and administrative expenses	8,000		20,000
Income	$7,000		$10,000
Net cash flow

Part B

Compute payback period for each investment.

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