Problem 25-2A 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 $350,000 investment for new machinery with a five-year life and no salvage value. Project Z requires a $350,000 investment for new machinery with a four-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 $395,000 $316,000 Sales Expenses Direct materials Direct labor Overhead including depreciation Selling and administrative expenses Total expenses Pretax income Income taxes (30%) Net income 55,300 79,000 142,200 28,000 304,500 90,500 27,150 $ 63,350 39,500 47,400 142,200 28,000 257,100 58,900 17,670 $ 41,230 Problem 25-2A Part 1 Required: 1. Compute each project's annual expected net cash flows. Project Y Project Z (2) Compute the accounting rate of return for this equipment. Accounting Rate of Return Choose Denominator: Choose Numerator: - Accounting Rate of Return Accounting rate of return Problem 25-2A Part 2 2. Determine each project's payback period. Payback Period Choose Numerator: 7 Choose Denominator: = Payback Period Payback period Project Y Project Z Problem 25-2A Part 3 3. Compute each project's accounting rate of return. Accounting Rate of Return 1 Choose Denominator: Choose Numerator: Accounting Rate of Return Accounting rate of return Project Y Project Z Problem 25-2A 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 Net present value Project Z Chart values are based on: Select Chart Amount * PV Factor - Present Value Net present value