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 $540,000 initial investment for new machinery with a four-year life and no salvage value. Project Z requires a $504,000 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 $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Project Y $ 490,000 Project Z $ 590,000 Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Income 208,000 135,000 68,000 $ 79,000 218,000 168,000 68,000 $ 136,000 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 project's 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 9% as the discount rate. If the company bases Investment decisions solely on net present value, which project will it choose? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Compute each project's net present value using 9% 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 = 4 i = 9% Select Chart Amount PV Factor Present Value Present Value of an Annuity of 1 $ 214,000 X 11 $ 0 Net present value Project Z Chart values are based on: n = i = Select Chart Amount x PV Factor Present Value $ 0 Net present value If the company bases investment decisions solely on net present value, which project will it choose? 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 $540,000 initial investment for new machinery with a four-year life and no salvage value. Project Z requires a $504,000 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 $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Project Y $ 490,000 Project Z $ 590,000 Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Income 208,000 135,000 68,000 $ 79,000 218,000 168,000 68,000 $ 136,000 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 project's 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 9% as the discount rate. If the company bases Investment decisions solely on net present value, which project will it choose? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Compute each project's net present value using 9% 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 = 4 i = 9% Select Chart Amount PV Factor Present Value Present Value of an Annuity of 1 $ 214,000 X 11 $ 0 Net present value Project Z Chart values are based on: n = i = Select Chart Amount x PV Factor Present Value $ 0 Net present value If the company bases investment decisions solely on net present value, which project will it choose
