Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment...
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Accounting
Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $175,500. Project 2 requires an initial investment of $120,000.
Annual Amounts
Project 1
Project 2
Sales of new product
$ 124,000
$ 104,000
Expenses
Materials, labor, and overhead (except depreciation)
71,000
38,000
DepreciationMachinery
26,000
24,000
Selling, general, and administrative expenses
14,000
26,000
Income
$ 13,000
$ 16,000
(a) Compute each projects annual net cash flows. (b) Compute payback period for each investment.
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