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 $345,000 investment for new machinery with a five-year life and no salvage value. Project Z requires a $345,000 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
Sales
$
380,000
$
304,000
Expenses
Direct materials
53,200
38,000
Direct labor
76,000
45,600
Overhead including depreciation
136,800
136,800
Selling and administrative expenses
27,000
27,000
Total expenses
293,000
247,400
Pretax income
87,000
56,600
Income taxes (38%)
33,060
21,508
Net income
$
53,940
$
35,092
4. Determine each projects net present value using 9% as the discount rate. Assume that cash flows occur at each year-end. (Round your intermediate calculations.)
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