t Company has an opportunity to invest in one of two new projects. Project Y requires a $310,000 investment for new machinery with a six-year life and no salvage value. Project Z requires a $310,000 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

Sales $365,000 $292,000

Expenses

Direct materials 51,100 36,500

Direct labor 73,000 43,800

Overhead including depreciation 131,400 131,400

Selling and administrative expenses 26,000 26,000

Total expenses 281,500 237,700

Pretax income 83,500 54,300

Income taxes (34%) 28,390 18,462

Net income $55,110 $35,838

Required:

1. Compute each projects annual expected net cash flows.

2. Determine each projects payback period.

3. Compute each projects accounting rate of return.

4. Determine each projects net present value using 7% as the discount rate. Assume that cash flows occur at each year-end. (Round your intermediate calculations.)

Required: 1. Compute each projects annual expected net cash flows.

Fill in the blank with the appropriate input:

Net Income

Pretax Income

Sales

Total Expenses

	Project Y	Project Z

2. Determine each projects payback period.

Fill in the blank with the appropriate input:

Accounts receivable

Annual net cash flow

Average total assets

Cost of goods sold

Cost of investment

Current assets

Current liabilities

Income before interest and inc tax

Net incomeinput options

Payback Period
	Choose Numerator:	/	Choose Denominator:	=	Payback Period
		/		=	Payback period
Project Y				=	0
Project Z				=	0

3. Compute each projects accounting rate of return.

Fill in the blank with the appropriate input:

Accounts receivable

Annual after-tax net income

Annual average investment

Annual pre-tax income

Average total assets

Cost of goods sold

Current assets

Current liabilities

Net salesinput options

Accounting Rate of Return
	Choose Numerator:	/	Choose Denominator:	=	Accounting Rate of Return
		/		=	Accounting rate of return
Project Y					0
Project Z					0

4. Determine each projects 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 =
i =
Select Chart	Amount	x	PV Factor	=	Present Value
Choose one: Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1				=	$0
Choose one: Present value of cash inflows Present value of cash outflows Net present value
Coose one: Present value of cash inflows Present value of cash outflows Net present value
Net present value
Project Z
Chart values are based on:
n =
i =
Select Chart	Amount	x	PV Factor	=	Present Value
Coose one: Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1				=	$0
Choose one: Present value of cash inflows Present value of cash outflows Net present value
Choose one: Present value of cash inflows Present value of cash outflows Net present value
Net present value