Required information 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 $315,000 investment for new machinery with a four-year life and no salvage value. Project Z requires a $315,000 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. (PV of $1EV of $1PVA of $1and FVA of $1 (Use appropriate factor(s) from the tables provided.) Project Project $355,000 $284,000 Sales Expenses Direct materials Direct labor Overhead including depreciation Selling and administrative expenses Total expenses Pretax income Income taxes (36) 49,700 71,000 127,800 25,000 273,500 81,500 29,340 35,500 42,600 127,800 25,000 230,900 53,100 19,116 Net income 52,16033,984

Required information [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 $315,000 investment for new machinery with a four-year life and no salvage value. Project Z requires a $315,000 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. (PV of $1. EV of $1. PVA of $1, and FVA of $1 ) (Use appropriate factor(s) from the tables provided.) Project Y Project Z $355,000 $284,000 Sales Expenses Direct materials 49,700 35,500 Direct labor 71,000 42,600 127,800 127,800 Overhead including depreciation Selling and administrative expenses 25,000 25,000 Total expenses 273,500 230,900 Pretax income 81,500 53,100 Income taxes (368) 29,340 19,116 Net income $ 52,160 $ 33,984 Required: 1. Compute each project's annual expected net cash flows. Project Y Project Z Net income 52,160 $ Depreciation expense 78,750 Expected net cash flows 130,910 $ $ $ 33,984 105,000 138,984 2. Determine each project's payback period. Choose Numerator: Project Y Project Z Cost of investment $ $ Payback Period 7 Choose Denominator: /Annual net cash flow 315,000/ $ 315,000 1 $ " 130,910) 138,984 = 11 Payback Period Payback period 2.41 years 2.27 years 3. Compute each project's accounting rate of return. Choose Numerator: Annual after-tax net income Project Y $ Project Z $ Accounting Rate of Return 1 52,160/ 33,984 / Choose Denominator: Annual average investment $ $ a 315,000 W 315,000 Accounting Rate of Return Accounting rate of return 16.6% 10.8 % 14 43:56 Project Y Chart values are based on: Select Chart Present Value of an Annuity of 1 Present value of cash inflows Present value of cash outflows Net present value Project Z Chart values are based on: Select Chart Net present value n= (= #H na Amount Amount: 8% X X PV Factor PV Factor = = B $ Present Value $ Present Value 0 0