Most Company has an opportunity to invest in one of two new projects. Project Y requires a $305,000 investment for new machinery with a five-year life and no salvage value. Project Z requires a $305,000 investment for new machinery with a four-year life and no salvage value. The two projects yield the following predicted annual results. The company uses straight-line depreciation, and cash flows occur evenly throughout each year. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Project Y Project z $400,000 $320,000 Sales Expenses Direct materials Direct labor Overhead including depreciation Selling and administrative expenses Total expenses Pretax income Income taxes (268) Net income 56,000 80,000 144,000 29,000 309,000 91,000 23,660 $ 67,340 40,000 48,000 144,000 29,000 261,000 59,000 15, 340 $ 43,660 Problem 24-2A Part 1 Required: 1. Compute each project's annual expected net cash flows. Project Y Project Z Most Company has an opportunity to invest in one of two new projects. Project Y requires a $305,000 investment for new machinery with a five-year life and no salvage value. Project Z requires a $305,000 investment for new machinery with a four-year life and no salvage value. The two projects yield the following predicted annual results. The company uses straight-line depreciation, and cash flows occur evenly throughout each year. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Project Y Project z $400,000 $320,000 Sales Expenses Direct materials Direct labor Overhead including depreciation Selling and administrative expenses Total expenses Pretax income Income taxes (26%) Net income 56,000 80,000 144,000 29,000 309,000 91,000 23, 660 $ 67,340 40,000 48,000 144,000 29,000 261,000 59,000 15,340 $ 43,660 Problem 24-2A Part 2 2. Determine each project's payback period. Payback Period Choose Choose Numerator: Denominator: Payback Period = Payback period = 0 Project Y Project 1 0 Most Company has an opportunity to invest in one of two new projects. Project Y requires a $305,000 investment for new machinery with a five-year life and no salvage value. Project Z requires a $305,000 investment for new machinery with a four-year life and no salvage value. The two projects yield the following predicted annual results. The company uses straight-line depreciation, and cash flows occur evenly throughout each year. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Project Y Project z $400,000 $320,000 Sales Expenses Direct materials Direct labor Overhead including depreciation Selling and administrative expenses Total expenses Pretax income Income taxes (26%) Net income 56,000 80,000 144,000 29,000 309,000 91,000 23, 660 $ 67,340 40,000 48,000 144,000 29,000 261,000 59,000 15,340 $ 43,660 Problem 24-2A Part 3 3. Compute each project's accounting rate of return. Accounting Rate of Return Choose Numerator: Choose Denominator: Accounting Rate of Return Accounting rate of return 1 Project Y Project 2 Most Company has an opportunity to invest in one of two new projects. Project Y requires a $305,000 investment for new machinery with a five-year life and no salvage value. Project Z requires a $305,000 investment for new machinery with a four-year life and no salvage value. The two projects yield the following predicted annual results. The company uses straight-line depreciation, and cash flows occur evenly throughout each year. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Project Y Project z $400,000 $320,000 Sales Expenses Direct materials Direct labor Overhead including depreciation Selling and administrative expenses Total expenses Pretax income Income taxes (26%) Net income 56,000 80,000 144,000 29,000 309,000 91,000 23, 660 $ 67,340 40,000 48,000 144,000 29,000 261,000 59,000 15,340 $ 43,660 Problem 24-2A Part 4 4. Determine each project's net present value using 9% as the discount rate. Assume that cash flows occur at each year-end. (Round your intermediate calculations.) Project Y Chart values are based on: ns i =
