Garcia Company can invest in one of two alternative projects. Project Y requires a $460,000 initial...

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Garcia Company can invest in one of two alternative projects. Project Y requires a $460,000 initial investment for new machinery with a four-year life and no salvage value. Project Z requires a $456,000 initial investment for new machinery with a three-year life and no salvage value. The two projects yield the following annual results. Cash flows occur evenly within each year. (PV of $1, FV of $1. PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Income Project Y Project Z $450,000 $550,000 200,000 115,000 60,000 210,000 152,000 $ 75,000 60,000 $128,000 Required: 1. Compute each project's annual net cash flows. 2. Compute each project's payback period. If the company bases investment decisions solely on payback period, which project will it choose? 3. Compute each project's accounting rate of return. If the company bases investment decisions solely on accounting rate of return, which project will it choose? 4. Compute each project's net present value using 7% as the discount rate. If the company bases investment decisions solely on net present value, which project will it choose? Garcia Company can invest in one of two alternative projects. Project Y requires a $460,000 initial investment for new machinery with a four-year life and no salvage value. Project Z requires a $456,000 initial investment for new machinery with a three-year life and no salvage value. The two projects yield the following annual results. Cash flows occur evenly within each year. (PV of $1, FV of $1. PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Income Project Y Project Z $450,000 $550,000 200,000 115,000 60,000 210,000 152,000 $ 75,000 60,000 $128,000 Required: 1. Compute each project's annual net cash flows. 2. Compute each project's payback period. If the company bases investment decisions solely on payback period, which project will it choose? 3. Compute each project's accounting rate of return. If the company bases investment decisions solely on accounting rate of return, which project will it choose? 4. Compute each project's net present value using 7% as the discount rate. If the company bases investment decisions solely on net present value, which project will it choose?

Answer rating: 100% (QA)

Lets start by computing each projects annual net cash flows Project Y Sales of new product 450000 Expenses Materials labor and overhead except depreci... View the full answer