[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 $300,000 investment for new machinery with a four-year life and no salvage value. Project Z requires a $300,000 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. (FV of $1, PV of $1, FVA of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.)

	Project Y					Project Z
Sales		$	385,000				$	308,000
Expenses
Direct materials			53,900					38,500
Direct labor			77,000					46,200
Overhead including depreciation			138,600					138,600
Selling and administrative expenses			28,000					27,000
Total expenses			297,500					250,300
Pretax income			87,500					57,700
Income taxes (36%)			31,500					20,772
Net income		$	56,000				$	36,928

8.

value: 7.00 points

Required information

Required:

1.

Compute each projects annual expected net cash flows.

	Project Y	Project Z
Net income

9.

value: 7.00 points

Required information

2.

Determine each projects payback period.

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

10.

value: 7.00 points

Required information

3.

Compute each projects accounting rate of return.

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

11.

value: 7.00 points

Required information

4.

Determine each projects net present value using 8% 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
				=	$0
Net present value
Project Z
Chart values are based on:
n =
i =
Select Chart	Amount	x	PV Factor	=	Present Value
				=	$0
Net present value