Question
Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $175,500. Project 2 requires an initial investment of $120,000.
Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $175,500. Project 2 requires an initial investment of $120,000.
| Annual Amounts | Project 1 | Project 2 |
|---|---|---|
| Sales of new product | $ 124,000 | $ 104,000 |
| Expenses | ||
| Materials, labor, and overhead (except depreciation) | 71,000 | 38,000 |
| DepreciationMachinery | 26,000 | 24,000 |
| Selling, general, and administrative expenses | 14,000 | 26,000 |
| Income | $ 13,000 | $ 16,000 |
(a) Compute each projects annual net cash flows. (b) Compute payback period for each investment.
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Financial Accounting
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso
3rd Edition
0471372668, 978-0471372660
