Problem 24-2A Analysis and computation of payback period, accounting rate of return, and net present value LO P1, P2, P3 [The following information applies to the questions displayed below.] Most Company has an opportunity to invest in one of two new projects. Project Y requires a $340,000 investment for new machinery with a four-year life and no salvage value. Project Z requires a $340,000 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, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Project Y Project z $360,000 $288,000 Sales Expenses Direct materials Direct labor Overhead including depreciation Selling and administrative expenses Total expenses Pretax income Income taxes (28%) Net income 50,400 72,000 129,600 26,000 278,000 82,000 22,960 $ 59,040 36,000 43,200 129,600 26,000 234,800 53,200 14,896 $ 38,304 Problem 24-2A Part 1 Required: 1. Compute each project's annual expected net cash flows. Project Y Project 2 Net income (Depreciation expense Expected net cash flows Check my Problem 24-2A Analysis and computation of payback period, accounting rate of return, and net present value LO P1, P2, P3 (The following information applies to the questions displayed below.) Most Company has an opportunity to invest in one of two new projects. Project Y requires a $340,000 investment for new machinery with a four-year life and no salvage value. Project Z requires a $340,000 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, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Project Y Project 2 Sales $360,000 $288,000 Expenses Direct materials 50,400 36,000 72,000 43,200 Overhead including depreciation 129,600 129,600 Selling and administrative expenses 26,000 26,000 Total expenses 278,000 234,800 Pretax income 82,000 53,200 Income taxes (288) 22,960 14,896 Net income $ 59,040 $ 38, 304 Direct labor s Problem 24-2A Part 2 2. Determine each project's payback period. Choose Numerator: Cost of investment Payback Period Choose Denominator: Annual net cash flow Payback Period Payback period 0 Project Y Project 2 0 Problem 24-2A Analysis and computation of payback period, accounting rate of return, and net present value LO P1, P2, P3 [The following information applies to the questions displayed below.) Most Company has an opportunity to invest in one of two new projects. Project Y requires a $340,000 investment for new machinery with a four-year life and no salvage value. Project Z requires a $340,000 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, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Sales Expenses Direct materials Direct labor Overhead including depreciation Selling and administrative expenses Total expenses Pretax income Income taxes (288) Net income Project Y Project z $360,000 $288,000 50,400 36,000 72,000 43,200 129,600 129,600 26,000 26,000 278,000 234,800 82,000 53,200 22,960 14,896 $ 59,040 $ 38,304 Problem 24-2A Part 3 3. Compute each project's accounting rate of return. Accounting Rate of Return Choose Numerator: 1 Choose Denominator: Annual after-tax net income 1 Annual average investment Accounting Rate of Return Accounting rate of return 0 Project Y Project Z 0 Problem 24-2A Part 4 4. Determine each project's net present value using 8% as the discount rate. Assume that cash flows occur at each year-end. (Round your intermediate calculations.) Project Y Chart values are based on: Select Chart Amount * PV Factor = Present Value 0 Net present value Project 2 Chart values are based on: n = Select Chart Amount PV Factor = Present Value $ 0 Net present value