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 requires a $320,000 investment for new machinery with a six-year life and no salvage value. Project Z requires a $320,000 investment for new machinery with a five-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 Z $380,000 $304,000 Sales Expenses Direct materials Direct labor Overhead including depreciation Selling and administrative expenses Total expenses Pretax income Income taxes (30%) Net income 53,200 76,000 136,800 27,000 293,000 87,000 26,100 $ 60,900 38,000 45,600 136,800 27,000 247, 400 56,600 16,980 $ 39,620 4. Determine each project's net present value using 7% as the discount rate. Assume that cash flows occur at each year-end. (Round your intermediate calculations.) Project Y Chart values are based on: Amount Py Factor - Present Value 4. Determine each project's net present value using 7% as the discount rate. Assume that cash flows occur at each year-end. (Round your intermediate calculations.) Project Y Chart values are based on: n= = Select Chart Amount PV Factor - Present Value Net present value Project 2 Chart values are based on: Select Chart Amount PV Factor Present Value Net present value Saved 4 Homework The following information applies to the questions displayed below.) Manning Corporation is considering a new project requiring a $80,000 investment in test equipment with no salvage value. The project would produce $71,500 of pretax income before depreciation at the end of each of the next six years. The company's income tax rate is 34%. In compiling its tax return and computing its income tax payments, the company can choose between the two alternative depreciation schedules shown in the table. (PV of $1. FV of $1, PVA of $1. and FVA of $1 (Use MACRS) (Use appropriate factor(s) from the tables provided.) Straight- Line MACRS Depreciation Depreciation Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Totals $ 8,000 16,000 16,000 16,000 16,000 8,000 $80,000 $16,000 25,600 15,360 9,216 9,216 4,608 $80,000 *The modified accelerated cost recovery system (MACRS) for depreciation is discussed in Chapter 8 Required: 1. Complete the following table assuming use of straight-line depreciation Net cash flow equals the amount of income before depreciation minus the income taxes. Income Before Depreciation Straight-Line Depreciation Taxable Income income Taxes Net Cash Flows Year 1 Year 2 Year 6 Totals 8,000 $80,000 4,608 $80,000 * The modified accelerated cost recovery system (MACRS) for depreciation is discussed in Chapter 8 Required: 1. Complete the following table assuming use of straight-line depreciation. Net cash flow equals the amount of income before depreciation minus the income taxes. Income Before Depreciation Straight-Line Depreciation Taxable Income income Taxes Net Cash Flows Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Required information (The following information applies to the questions displayed below.] Manning Corporation is considering a new project requiring a $80,000 investment in test equipment with no salvage value. The project would produce $71,500 of pretax income before depreciation at the end of each of the next six years. The company's income tax rate is 34%. In compiling its tax return and computing its income tax payments, the company can choose between the two alternative depreciation schedules shown in the table. (PV of $1, FV of $1, PVA of $1, and FVA of $1 (Use MACRS) (Use appropriate factor(s) from the tables provided.) Straight- MACRS Line Depreciation Depreciation Year 1 $ 8,000 $16,000 Year 2 16,000 25,600 Y nr 3 16,000 15,360 Year 4 16,000 9,216 Year 5 16,000 9,216 Year 6 8,000 4,608 Totals $80,000 $80,000 * The modified accelerated cost recovery system (MACRS) for depreciation is discussed in Chapter 8. 3. Compute the net present value of the investment if straight-line depreciation is used. Use 8% as the discount rate. Chart Values are Based on: - The modified accelerated cost recovery system (MACRS) for depreciation is discussed in Chapter 8 3. Compute the net present value of the investment if straight-line depreciation is used. Use 8% as the discount rate. Chart Values are Based on: i=1 Year Net Cash Inflow X PV Factor - Present Value 5 Net present value * The modified accelerated cost recovery system (MACRS) for depreciation is discussed in Chapter 8. 4. Compute the net present value of the investment if MACRS depreciation is used. Use 8% as the discount rate. Chart Values are Based on: i PV Factor - Present Value Year Net Cash Inflow X 1 w Net present value