Most Company has an opportunity to invest in one of two new projects. Project Y requires a $335,000 investment for new machinery with a six-year life and no salvage value. Project Z requires a $335,000 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 $ 375,000 $ 300,000 Expenses Direct materials 52,500 37,500 Direct labor 75,000 45,000 Overhead including depreciation 135,000 135,000 Selling and administrative expenses 27,000 27,000 Total expenses 289,500 244,500 Pretax income 85,500 55,500 Income taxes (40%) 34,200 22,200 Net income $ 51,300 $ 33,300
2.
value:
5.00 points
Required information
Required:
1. Compute each project’s annual expected net cash flows.
Answer is not complete
Project YProject Z
Net income$55,760$36,176
Depreciation expense
Expected net cash flows
3.
value:
5.00 points
Required information
2. Determine each project’s payback period.
Answer is not complete
Payback Period
Choose Numerator:/Choose Denominator:=Payback Period
Cost of investment/Annual net cash flow=Payback period
Project Y =0
Project Z =0
4.
value:
5.00 points
Required information
3. Compute each project’s accounting rate of return.
Answer is not complete
Accounting Rate of Return
Choose Numerator:/Choose Denominator:=Accounting Rate of Return
Annual after-tax net income/Annual average investment=Accounting rate of return
Project Y 0
Project Z 0
5.
value:
5.00 points
Required information
4. Determine each project’s net present value using 9% as the discount rate. Assume that cash flows occur at each year-end. (Round your intermediate calculations.)
Answer is not complete
Project Y
Chart values are based on:
n =
i =9%
Select ChartAmountxPV Factor=Present Value
Present Value of an Annuity of 1 =$0
Present value of cash inflows
Present value of cash outflows
Net present value
Project Z
Chart values are based on:
n =5
i =9%
Select ChartAmountxPV Factor=Present Value
Present Value of an Annuity of 1 =$0
Present value of cash inflows
Present value of cash outflows
Net present value