Most Company has an opportunity to invest in one of two new projects. Project Y requires a $350,000 investment for new machinery with a four-year life and no salvage value. Project Z requires a $350,000 investment for new machinery with a three-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, andFVA 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 (30%)

24,000

15,600

Net income

$

56,000

$

36,400

Required:

1.

Compute each projects annual expected net cash flows.

2.

Determine each projects payback period.

3.

Compute each projects accounting rate of return.

4.	Determine each projects net present value using 8% as the discount rate. Assume that cash flows occur at each year-end.