Complete problems 1-4 based on the following scenario. Crouch Corp. needs to decide which of two new projects to invest in.

• Project A is an investment in new machinery that will cost $264,000 and has a four-year life with no salvage value.
• Project B is an investment in new machinery that will cost $264,000 and has a three-year life with no salvage value.

Using straight-line depreciation, Crouch Corp. predicts that the two projects will yield the following annual results, with cash flows occurring evenly throughout the year.

Input values Company name Crouch Corp Tax rate 20% Discount rate 6% Project A Project B Investment $ 264,000 $ 264,000 Life of machinery (in years) 4 3 four three Salvage value $0 $0 Predicted Annual Results Project A ($) Project B ($) Sales 275,000 220,000 Expenses: Direct materials 38,500 27,500 Direct labor 55,000 33,000 Overhead including depreciation 99,000 99,000 Selling and administrative expenses 19,800 19,800 Total expenses 212,300 179,300 Pretax income 62,700 40,700 Income taxes (20%) 12,540 8,140 Net income 50,160 32,560 Present value of $1 at 6% annuity for 4 years 3.4651 Present value of $1 at 6% annuity for 3 years 2.6730Predicted Annual Results Project A Project B Sales $ 275,000 $ 220,000 Expenses: Direct materials 38,500 27,500 Direct labor 55,000 33,000 Overhead including depreciation 99,000 99,000 Selling and administrative expenses 19,800 19.800 Total expenses $ 212,300 $ 179,300 Pretax income 62,700 40,700 Income taxes (20%) 12.540 8,140 Net income CA 50,160 $ 32,560