Problem 25-2A Analysis and computation of payback period, accounting rate of return, and net present value Mo st Company has an opportunity to invest in one of two new projects. Project Y requires a $350,000 investment for new machinery with a four-year life and no salvage Value. Project Z requires a $350,000 investment for new machinery with a three-year e and no salvage value. The two projects yield the following predicted annual results. Th e company uses straight-line depreciation, and cash flows occur evenly throughout each year. ProjectY Project Z $350,000 $280,000 Sales Expenses Direct materials 35,000 42,000 126,000 25.000 270.000 228,000 80,00052,000 2400015.600 $56,000 36,400 49,000 70,000 126,000 25,000 Direct labor Overhead including depreciation Selling and administrative expenses Total expenses Pretax income Income taxes (30%) Net income Required 1. Compute each project's annual expected net cash flows. (Round the net cash flows to the nearest dollar.) 2. Determine each project's payback period. (Round the payback period to two 3. Compute each project's accounting rate of return. (Round the percentage return to 4. Determine each project's net present value using 8% as the discount rate. For part 4 decimals.) Check For Project Y: (2) 2.44 years one decimal.) (3) 32% only, assume that cash flows occur at each year-end. (Round the net present value to the nearest dollar.) (4) $125,286 Analysis Component 5. Identify the project you would recommend to management and explain your choice