Problem 26-2A Analyzing and computing payback period, accounting rate of return, and net present value QP1 P2 P3 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 four-year life and no salvage value. Project Z requires a $350,000 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. Project Y Project Z $350,000 $280,000 Sales Expenses Direct materials 49,000 Direct labor 70,000 126,000 35,000 42,000 126,000 25,000 25,000 270,000 228,000 Overhead including depreciation Selling and administrative expenses Total expenses Pretax income Income taxes (30%) Net income 80,000 24,000 $ 56,000 52,000 15,600 $ 36,400 Required 1. Compute each project's annual expected net cash flows. (Round the net cash flows to the nearest dollar.) 2. Determine each project's payback period. (Round the payback period to two decimals.) Check For Project Y: (2) 2.44 years, (3) 32% 3. Compute each project's accounting rate of return. (Round the percentage return to one decimal.) 4. Determine each project's net present value using 8% as the discount rate. For part 4 only, assume that cash flows occur at each year-end. (Round the net present value to the nearest dollar.) (4) $125,286