Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $268,000. Project 2 requires an initial investment of $170,000.

Annual Amounts	Project 1	Project 2
Sales of new product	$ 180,000	$ 160,000
Expenses
Materials, labor, and overhead (except depreciation)	85,000	52,000
DepreciationMachinery	40,000	38,000
Selling, general, and administrative expenses	28,000	40,000
Income	$ 27,000	$ 30,000

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

Annual Amounts	Project 1		Project 2
	Income	Cash Flow	Income	Cash Flow
Sales of new product	$180,000		$160,000
Expenses
Materials, labor, and overhead (except depreciation)	85,000		52,000
DepreciationMachinery	40,000		38,000
Selling, general, and administrative expenses	28,000		40,000
Income	$27,000		$30,000
Net cash flow		$0		$0

Payback Period
	Numerator:	/	Denominator:
		/		=	Payback period
Project 1				=	0
Project 2				=	0