Problem 24-2A 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 $325,000 investment for new machinery with a six-year life and no salvage value. Project Z requires a $325,000 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. (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		$	390,000				$	312,000
Expenses
Direct materials			54,600					39,000
Direct labor			78,000					46,800
Overhead including depreciation			140,400					140,400
Selling and administrative expenses			28,000					28,000
Total expenses			301,000					254,200
Pretax income			89,000					57,800
Income taxes (28%)			24,920					16,184
Net income		$	64,080				$	41,616

Problem 24-2A Part 1

Required:
1.	Compute each projects annual expected net cash flows.

Problem 24-2A Part 2

2.	Determine each projects payback period.

Problem 24-2A Part 3

3.	Compute each projects accounting rate of return.

Problem 24-2A Part 4

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