Problem 24-2A (Static) Payback period, accounting rate of return, net present value, and net cash flow calculation LO P1, P2, P3 [The following information applies to the questions displayed below.] Project Y requires a $350,000 investment for new machinery with a four-year life and no salvage value. The project yields the following annual results. Cash flows occur evenly within each year. (PV of $1. FV of $1. PVA of $1, and EVA of $1) (Use appropriate factor(s) from the tables provided.) Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Income Project Y $ 350,000 157,500 87,500 49,000 $ 56,000 Problem 24-2A (Static) Part 1 Required: 1. Compute project Y's annual net cash flows. Annual amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Income Net cash flow Income Cash Flow $ 350,000 $ 350,000 157,500 87,500 49,000 56,000 350,000 Problem 24-2A (Static) Part 2 2. Determine Project Y's payback period. Project Y Numerator: Payback Period Denominator: = Payback period 0 Problem 24-2A (Static) Part 3 3. Compute Project Y's accounting rate of return. es Project Y Numerator: Accounting Rate of Return Denominator: Accounting rate of return Problem 24-2A (Static) Part 4 4. Determine Project Y's net present value using 8% as the discount rate. (Do not round intermediate calculations. Round your present value factor to 4 decimals and final answers to the nearest whole dollar.) Years 1-4 Net present value Present Value Present Value of Net Cash Flows x of Annuity at 8% Net Cash Flows Table B.1 Present Value of 1 p=1/(1+i)". Rate Periods 1% 2% 3% 4% 5% 6% 7% 8% 1 0.9901 0.9804 0.9709 0.9615 0.9524 0.94341 2 0.9803 0.9612 0.9426 0.9246 0.9070 0.8900 3 0.9706 0.9423 09151 0.8890 0.8638 0.8396 0.9346 0.9259 0.8734 0.8573 0.8163 0.7938 4 0.9610 0.9238 0.8885 0.8548 0.8227 0.7921 5 0.9515 0.9057 0.8626 0.8219 0.7835 0.7473 6 0.9420 0.8880 0.8375 0.7903 0.7462 0.7050 0.6663 7 0.9327 0.8706 0.8131 0.7599 0.7107 0.6651 0.6227 8 0.9235 0.8535 0.78941 0.7307 0.6768 0.6274 0.5820 9 09143 0.8368 0.7664 0.7026 0.6446 0.5919 0.5439 0.5002 0.7629 0.7350 0.7130 0.6806 0.6499 0.6302 0.5963 0.5835 0.5470 0.5403 0.5019 04604 9% 10% 12% 15% 0.9174 0.9091 0.8929 0.8696 0.8417 0.8264 0.7972 0.7561 0.7722 0.7513 0.7118 0.6575 0.7084 0.6830 0.6355 0.5718 0.6209 0.5674 0.4972 0.4323 0.5645 0.5066 0.3759 0.5132 0.4523 0.4665 0,4039 0.3269 0.4241 0,3606 Periods 1 2 3 4F 6 7 8 0.2843 9 10 0.9053 0.8203 0.7441 0.6756 0.6139 0.5584 0.5083 0.4632 04224 0.3855 0.3220 0.2472 10 11 0.8963 0.8043 0.7224 0.6496 0.5847 0.5268 0.4751 0.4289 0.3875 0.3505 0.2875 0.2149 11 12 0.8874 0.7885 0.7014 0.6246 0.5568 0.4970 0.4440 0.3971 03555 0.3186 02567 0.1869 12 13 0.8787 0.7730 0.68101 0.6006 0.5303 0.4688 0.4150 0.3677 0.3262 0.2897 0.2292 0.1625 13 14 0.8700 0.7579 0.6611 0.5775 0.5051 04423 0.3878 0.3405 0.2992 0.2633 0.2046 0.1413 14 15 0.8613 0.7430 0.6419 0.5553 0.4810 04173 0.3624 0.3152 0.2745 0.2394 0.1827 0.1229 15 16 0.8528 0.7284 0.6232 0.5339 04581 0.3936 0.3387 0.2919 0.2519 0.2176 0.1631 0.1069 16 17 0.8444 0.7142 0.6050 0.5134 0.4363 0.3714 0.3166 0.2703 0.2311 0.1978 0.1456 0.0929 17 18 0.8360 0.7002 0.5874 0.4936 0.4155 0.3503 0.2959 0.2502 0.2120 0.1799 0.1300 0.0808 18 19 0.8277 0.6864 0.5703 04746 0.3957 0.3305 0.2765 0.2317 0.1945 0.1635 0.1161 0.0703 19 20 0.8195 0.6730 0.5537 04564 0.3769 0.3118 0.2584 0.2145 0.1784 0.1486 0.1037 0.0611 20 25 0.7798 0.6095 04776 0.3751 0.2953 0.2330 0.1842 0.1460 0.1160 0.0923 0.0588 00304 25 30 0.7419 0.5521 04120 0.3083 0.2314 0.1741 0.1314 0.0994 0.0754 0.0573 0.0334 0.0151 30 35 0.7059 0.5000 0.3554 0.2534 40 0.6717 0.4529 0.3066 0.2083 0.1813 0.14201 0.1301 0.0972 0.0937 0.0676 0.0490 0.0356 0.0189 0.0075 35 0.0668 0.0460 0.0318 0.0221 0.0107 0.0037 40 Used to compute the present value of a known future amount. For example: How much would you need to invest today at 10% compounded semiannually to accumulate $5,000 in 6 years from the factors of n 12 and i 5% (12 semiannual periods and a semiannual rate of 5%), the factor is 0.5568. You would need to invest $2,784 today ($5,000 x 0.5568).