Question: Help me please and can you use a graph easy to explain. Most Company has an opportunity to invest in one of two new projects.
Help me please and can you use a graph easy to explain.
| Most Company has an opportunity to invest in one of two new projects. Project Y requires a $325,000 investment for new machinery with a six-year life and no salvage value. Project Z requires a $325,000 investment for new machinery with a five-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. (FV of $1, PV of $1, FVA of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) |
| Project Y | Project Z | |||||||||
| Sales | $ | 370,000 | $ | 296,000 | ||||||
| Expenses | ||||||||||
| Direct materials | 51,800 | 37,000 | ||||||||
| Direct labor | 74,000 | 44,400 | ||||||||
| Overhead including depreciation | 133,200 | 133,200 | ||||||||
| Selling and administrative expenses | 26,000 | 26,000 | ||||||||
| Total expenses | 285,000 | 240,600 | ||||||||
| Pretax income | 85,000 | 55,400 | ||||||||
| Income taxes (30%) | 25,500 | 16,620 | ||||||||
| Net income | $ | 59,500 | $ | 38,780 | ||||||
5.
value: 2.00 points
Required information
| Required: | |
| 1. | Compute each projects annual expected net cash flows. |
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6.
value: 2.00 points
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| 2. | Determine each projects payback period. |
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7.
value: 2.00 points
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| 3. | Compute each projects accounting rate of return. |
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8.
value: 2.00 points
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| 4. | Determine each projects net present value using 8% as the discount rate. Assume that cash flows occur at each year-end. (Round your intermediate calculations.) |
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