Problem 24-3A (Algo) Applying payback period, accounting rate of return, and net present value

Problem 24-3A (Algo) Applying payback period, accounting rate of return, and net present value LO P1, P2, P3 Garcia Company can invest in one of two alternative projects. Project Y requires a $400,000 initial investment for new machinery with a four-year life and no salvage value. Project Z requires a $402,000 Initial investment for new machinery with a three-year life and no salvage value. The two projects yield the following annual results. Cash flows occur evenly within each year. (PV of $1. FV of $1. PVA of S1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Project y $ 450,000 Project 2 $430,000 Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation Machinery Selling, general, and administrative expenses Income 195,000 100,000 51,000 $ 104,000 190,000 134,000 45,900 $ 61,098 Required: 1. Compute each project's annual net cash flows. 2. Compute each project's payback period. If the company bases investment decisions solely on payback period, which project will it choose? 3. Compute each projects accounting rate of return. If the company bases investment decisions solely on accounting rate of return, which project will it choose? 4. Compute each project's net present value using 6% as the discount rate. If the company bases investment decisions solely on net present value, which project will it choose? Required 1 Required 2 Required 3 Required 4 Compute each project's annual net cash flows. Expected Net Cash Flow - Project Y Net cash flow Expected Net Cash Flow - Project Z Net cash flow Required 1 Required 2 Required 3 Required 4 Compute each project's payback period. If the company bases investment decisions solely on payback period, which proje Payback Period Payback period Numerator: 1 Denominator: 1 Project Y Project Z if the company bases investment decisions solely on payback period, which project will it choose? Required 1 Required 2 Required 3 Required 4 Compute each project's accounting rate of return. If the company bases investment decisions solely on accounting rate of return, which project will it choose? Accounting Rate of Return Numerator: Denominator: - Accounting rate of return Project Y Projedz If the company bases investment decisions solely on accounting rate of retum, which project will it choose? Required 1 Required 2 Required 3 Required 4 Compute each project's net present value using 6% as the discount rate. If the company bases investment decisions solely on net present value, which project will it choose? (Do not round intermediate calculations. Round your present value factor to 4 decimals and final answers to the nearest whole dollar) Project Y Chart values are based on: n = 1 = Select Chart Amount PV Factor Present Value Net present value Project z Chart values are based on: n 1 Project Chart values are based on: n = = Select Chart Amount PV Factor 11 Present Value Net present value If the company bases investment decisions solely on net present value, which project will it choose?