Problem 11-2A Analysis and computation of payback period, accounting rate of return, and net present value LO P1, P2, P3

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Most Company has an opportunity to invest in one of two new projects. Project Y requires a $335,000 investment for new machinery with a four-year life and no salvage value. Project Z requires a $335,000 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. (FV of $1, PV of $1, FVA of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.)

	Project Y					Project Z
Sales		$	385,000				$	308,000
Expenses
Direct materials			53,900					38,500
Direct labor			77,000					46,200
Overhead including depreciation			138,600					138,600
Selling and administrative expenses			28,000					27,000
Total expenses			297,500					250,300
Pretax income			87,500					57,700
Income taxes (28%)			24,500					16,156
Net income		$	63,000				$	41,544

Problem 11-2A Part 1 Required: 1. Compute each project's annual expected net cash flows. Project Y Project Z