Wellace Corp. has an annuity to invest in one of two new projects. Project v requires a
Question:
Wellace Corp. has an annuity to invest in one of two new projects. Project v requires a 350,000 investment for new machinery with a four-year life and no salvage value. Project W also requires a 350,000 investment but the new machinery has a three- year life and no salvage value. The two projects yield the following predicted annual result. The company uses straight-line depreciation, and cash flow occurs evenly throughout each year.
1. Compute each project? annual expected net cash flows. Round net cash flow to the nearest dollar)
2. Determine each project payback period. Round the payback period to two decimals)
3. Compute each project accounting rate of return. Round the percentage return to decimal.
4. Determine each project?s net present value using 8% as the discount rate for part 4 only, assume that cash flows occurs at each year ?year end( round net present values to the nearest dollar)
5. Identify the project would you recommend to manager to management and explain your choice.
Cornerstones of Managerial Accounting
ISBN: 978-0324660135
3rd Edition
Authors: Mowen, Hansen, Heitger