Question: Can I have answer for REQUIREMENTS 6.

Leeds Company has an opportunity to invest in one or two new projects. Project A requires a $350,000 investment for new machinery with a

four-year life and no salvage value. Project B requires a $350,000 investment for new machinery with a three-year life and a $10,000 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 A

Sales	$350,000
Expenses:
Direct materials	49,000
Direct labor	70,000
Overhead including depreciation	126,000
Selling & administrative expenses	25,000
Tax rate	30%

Project B

Sales	$280,000
Expenses:
Direct materials	35,000
Direct labor	42,000
Overhead including depreciation	126,000
Selling & administrative expenses	25,000
Tax rate	30%

REQUIREMENTS:

1. In the first table in the working papers, you will use one column to determine net income, and the next column to determine net cash flows. HINT: Think about what on the income statement is never cash...this is the amount not to include in the net cash flows column. Compute each projects annual expected net cash flows (round to nearest dollar)

2. Determine each projects net present value using 8% as the discount rate (this is your interest rate). Assume that cash flows occur at each year-end (round to nearest dollar). Complete with both manual math formulas and using the Excel NPV formula.

3. Determine each projects payback period (round to two decimal places).

4. Compute each projects accounting rate of return (round percentage to one decimal place).

5. Calculate using the Excel IRR tool, solving for the expected internal rate of return for each project.

6. Explain to your instructor your investment recommendations, Project A or B? Be sure to use data arrived at in the above analysis.