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 six-year life and no salvage value. Project Z requires a $305,000 investment for new machinery with a five-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 Sales   $ 350,000     $ 280,000   Expenses                 Direct materials     49,000       35,000   Direct labor     70,000       42,000   Overhead including depreciation     126,000       126,000   Selling and administrative expenses     25,000       25,000   Total expenses     270,000       228,000   Pretax income     80,000       52,000   Income taxes (28%)     22,400       14,560   Net income   $ 57,600     $ 37,440  

1. Compute each project's annual expected net cash flows.

Project YProject ZNet incomeDepreciation expenseExpected net cash flows