Problem 26-3A (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 $520,000 initial investment for new machinery with a four-year life and no salvage value. Project Z requires a $492,000 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. EV 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 Required: 1. Compute each project's annual net cash flows. Project Y $480,000 206,000 130,000 66,000 Project 2 $ 580,000 216,000 164,000 66,000 $ 78,000 5 134,000 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 8% as the discount rate. If the company bases investment decisions solely on net present value, which project will it choose?