Sorry for the lengthy Question. 1. The changes described above will cause the original (connect) project information to change. Use the tables below and follow the direction underneath to calculate iMost Companys new projected information. Round all dollar amounts to nearest whole dollars. Numbers to be used in number 1 are included as screenshots from the homework.

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! 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 five-year life and no salvage value. Project Z requires a $315,000 investment for new machinery with a four-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 $360,000 $288,000 Sales Expenses Direct materials Direct labor Overhead including depreciation Selling and administrative expenses Total expenses Pretax income Income taxes (30%) Net income 50,400 36,000 72,000 43,200 129,600 129,600 26,000 26,000 278,000 234,800 82,000 53,200 24,600 15,960 $ 57,400 $ 37,240 Required: Required: 1. Compute each project's annual expected net cash flows. Answer is complete and correct. Project Y Project Z Net income 57,400 37,240 Depreciation expense 63,000 78,750 Expected net cash flows 120,400 115,990 2. Determine each project's payback period. Answer is complete and correct. Payback Period 1 Choose Denominator: Choose Numerator: Payback Period Payback period Cost of investment Annual net cash flow = 1 / $ $ 120,400 II 2.62 years Project Y Project z 315,000 315,000 $ / 115,990 = 2.72 years 3. Compute each project's accounting rate of return. Accounting Rate of Return Choose Numerator: 1 Choose Denominator: II Accounting Rate of Return Annual after-tax net income / = Accounting rate of return $ 1 = Annual average investment $ 157,500 $ 157,500 Project Y Project Z 36.4 % 57,400 37,240 $ / = 23.6 % 4. Determine each project's net present value using 6% as the discount rate. Assume that cash flows occur at each year-end. (Round your intermediate calculations.) Project Y Chart values are based on: na 6% Select Chart Amount PV Factor = Present Value Present Value of an Annuity of 1 $ 120,400 4.2124 $ 507,173 Present value of cash inflows $ 507,173 315,000 Present value of cash outflows Net present value $ 192,173 Project z Chart values are based on: n = i = 6% Amount X 115,990 Present Value Select Chart Present Value of an Annuity of 1 PV Factor 3.4651 = $ $ 401,917 Present value of cash inflows $ 401,917 Present value of cash outflows 315,000 86,917 Net present value $ OVERVIEW: In the questions on connect, iMost Company compares two projects; Project Y and Project Z. To continue the scenario, after their initial evaluation of the projects (connect), iMost Company wants to make some changes to its original assumptions and re-evaluate. The company wants to make both the projects (Y and Z) span the same six-year period. To understand the requirements necessary to accomplish this, the company hires an outside consulting service to perform a more in- depth/ study of the business plans and identify changes to accommodate the six-year length. Project annual net income is estimated for each project (Y and Z) for each of the 6 years. This projected annual income is used to calculate annual cash flows from operations. iMost also plans to borrow money, thus reducing their initial investment. All factors surrounding the projects (Y and Z) are evaluated using various capital budgeting tools, including Pay-Back Period, Net Present Value, Profitability Index and Break-Even Time. The best project (Y or Z) is selected to run as a division of the company iMost. Targeted evaluation measures are calculated for the division actual operating. Four years later, the company's operating results are compared to the targets. After this post audit, various operational decisions are examined for viability for years 5 and 6. Given Information: Before iMost Company chooses between Projects Y and Z, the company hires an outside consulting service to perform an in-depth study and develop a more detailed business plan. The consultants' report indicated the following items need to be adjusted to the original projecte net income for the projects (Y and Z): To assure the new equipment will last the full 6 years, it is recommended that iMost purchase an improved model for Project Z. Additionally, regardless which project they choose, (Y or Z), it is recommended that iMost Company enter into a maintenance agreement. a. b. The equipment for both projects will have a salvage value at the end of 6 years. c. The consulting firm has determined that purchasing advertising in the first three years of the project will result in significantly increase sales (and variable expenses) over the entire 6 years of the projects. The advertising will cause sales, direct material, and direct labor expenses to increase. d. iMost Company will also need to maintain a certain level of working capital for each project. e. To off-set the increased cost of the equipment for Project Z as well as the working capital required for both projects, iMost Company plans to borrow any amount of the project that exceeds $300,000. iMost will make interest payments annually (Interest Expense) and plans to pay the note at the end of the third year of operations. 1. The changes described above will cause the original (connect) project information to change. Use the liables below and follow the direction underneath to calculate iMost Company's new projected information. Round all dollar amounts to nearest whole dollars. f Calculate the "New" overhead amount as follows: Original overbead - Original depreciation New depreciation New Maintenance. Note - The Stunts will be dillerent for each project Item Original connect) Original (connect) Project 2 New Projectod Explanations for changes Add $40.000 g. The increased advertising will cause sales, direct material, and direct labor to increase by 14% for Project Y and 28% for Project 7. Calculate the "New" project sales revenue, direct material expense and direct labor expense for each project and include in the table appropriately. 6 0 0 h. To connexlate the increased sales volume, iMost expects S&A expenses to increase hy 7% for Project Y and 14% for Project 2. Calculate the "Now" S&A cxpenses for cach project. Equipment Cost Uscful Life Salvage Value Maintenance Alien Sales Direct Material Direct Labor OH including Dep 0 0 Project Y New Explanations for Projectod changes unchanged 6 4,000 sive calculate 2% of Equip.cost increase by 14% increase by 14% increase by 1499 original-arginal depreciation "Neu" decision + inline increase by ? $9.ww les equipment Cost wering capital ) 200,000 Hall'den made kens interesse i. The required witking capital is estimated to be 8% of the "New" sales annount for each project Calculate the working capital for each project and included it appropriately 5% of new cakulate 2% of La cost increase by 28 increase by 26% increase by 28% anginal-original - | depreciation - "New" pristo . + mainCTED increase by 14% Xul new sales equipment was working capital 900.000 Jual discount rate Luanin me S&A Expenses Working Capital Lexan amount 0 0 0 j. Calculate the Laan amciunt for each project as the total asset cost above $700,000: New equipment cost + Working Capital 300,000. Include in the table appropriately Most Company will be able to borrow mocy at an interest rate of Lalf their discount sate. The discount rate was given in connect Q21. Calculate the interest rate for the Icran as hall the discount rate. Include the interest cxpcosc amount in the table appropriately. 1. Calculate the annual interest cxpense as the loan amount times the interest rate and include in the table appropriately, 0 Loan Interest rate n/a 0 nia 0 Interest Expense a. Include the appropriate information for connect in the original" olurns for both projects (pale blue cells). Note - The original depreciation expense was calculatod for Q18 00 connect. All other information was provided in the information for Q18-21. b. Equipment cost for Project Y will be unchanged. Project Z's "New" projected cost will be $10,000 higher than the anginal. Adel 40,000 to the original" exl of equipment and include in the "New" column for Project Z. c. The salvage value for Project Y is estimated to be $4,000. The salvage value for Project 7 is estimated to be 5% of its "New" project cost. Calculate the salvage value for Project Z's equipment and include the amount in the "New" column appropriately d. Calculate the "New" projected straight-line depreciation amounts for both projects using the respective salvage values and year useful life. Include arnciunis in the lable in the "New" columna. e. Calculate the "New" maintenance expense for each project ns 2% of the "New" project equipment cost respectively for Project Y and Z. This amount will also be added to the overhead expense Project 6 Page 2 of 13 Project 6 Page 3 of 13 Project 6