Most Company has an opportunity to invest in one of two new projects. Project Y...
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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 four-year life and no salvage value. Project Z requires a $335,000 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. (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
$
390,000
$
312,000
Expenses
Direct materials
54,600
39,000
Direct labor
78,000
46,800
Overhead including depreciation
140,400
140,400
Selling and administrative expenses
28,000
28,000
Total expenses
301,000
254,200
Pretax income
89,000
57,800
Income taxes (32%)
28,480
18,496
Net income
$
60,520
$
39,304
Compute each projects annual expected net cash flows.
Project X
Project Y
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