50.1K

Verified Solution

Link Copied!

Most Company has an opportunity to invest in one of two new projects. Project Y requires a $310,000 Investment for new machinery with a five-year life and no salvage value. Project Z requires a $310,000 Investment for new machinery with a four-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 $400,000 $320,000 Sales Expenses Direct materials Direct labor Overhead including depreciation Selling and administrative expenses Total expenses Pretax income Income taxes (32%) Net income 56,000 40,000 80,000 48,000 144,000 144,000 29,000 29,000 309,000 261,000 91,000 59,000 29,120 18,880 $ 61,880 $ 40,120 2. Determine each project's payback period. Choose Numerator: = Payback Period 1 Choose Denominator: Average accounts / receivable, net Payback Period Accounts receivable = Payback period = 0 Project Y Project Z = 0 0 Most Company has an opportunity to invest in one of two new projects. Project Y requires a $310,000 investment for new machinery with a five-year life and no salvage value. Project Z requires a $310,000 investment for new machinery with a four-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 $400,000 $320,000 Sales Expenses Direct materials Direct labor Overhead including depreciation Selling and administrative expenses Total expenses Pretax income Income taxes (32%) Net income 56,000 40,000 80,000 48,000 144,000 144,000 29,000 29,000 309,000 261,000 91,000 59,000 29,120 18,880 $ 61,880 $ 40,120 3. Compute each project's accounting rate of return. Accounting Rate of Return Choose Denominator: Choose Numerator: 1 1 = Accounting Rate of Return Accounting rate of return 0 Project Y Project z 0 Most Company has an opportunity to invest in one of two new projects. Project Y requires a $310,000 Investment for new machinery with a five-year life and no salvage value. Project Z requires a $310,000 Investment for new machinery with a four-year life and no salvage value. The two projects yleld 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 $400,000 $320,000 Sales Expenses Direct materials Direct labor Overhead including depreciation Selling and administrative expenses Total expenses Pretax income Income taxes (32%) Net income 56,000 80,000 144,000 29,000 309,000 91, eee 29,120 $ 61,880 40,000 48,888 144,888 29,888 261,880 59,800 18,888 $ 40,120 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.) Project Y Chart values are based on: i = Select Chart Amount PV Factor = Present Value = S 0 Net present value Project Z Chart values are based on: n = i = Select Chart Amount PV Factor = Present Value S 0 Net present value

Answer & Explanation Solved by verified expert

See Answer