Required information
Problem 25-2A Analysis and computation of payback period, accounting rate of return, and net present value LO P1, P2, P3
[The following information applies to the questions
displayed below.]
Most Company has an opportunity to invest in one of two new
projects. Project Y requires a $335,000 investment for new
machinery with a four-year life and no salvage value. Project Z
requires a $335,000 investment for new machinery with a three-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. (PV
of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate
factor(s) from the tables provided.)
Project Y | Project Z | |||||||
Sales | $ | 390,000 | $ | 312,000 | ||||
Expenses | ||||||||
Direct materials | 54,600 | 39,000 | ||||||
Direct labor | 78,000 | 46,800 | ||||||
Overhead including depreciation | 140,400 | 140,400 | ||||||
Selling and administrative expenses | 28,000 | 28,000 | ||||||
Total expenses | 301,000 | 254,200 | ||||||
Pretax income | 89,000 | 57,800 | ||||||
Income taxes (36%) | 32,040 | 20,808 | ||||||
Net income | $ | 56,960 | $ | 36,992 | ||||
Problem 25-2A Part 1
Required:
1. Compute each project’s annual expected net cash
flows.
Project Y | Project Z | |
Net income | 56960 | 36992 |
Depreciation expense | 83750 | 111667 |
Expected net cash flows | 140710 | 148659 |
Workings: | ||
Project Y | Project Z | |
Depreciation expense | =335000/4 | =335000/3 |
Required information Problem 25-2A Analysis and computation of payback period, accounting rate of return, and net...
Required information Problem 25-2A Analysis and computation of payback period, accounting rate of return, and net present value LO P1, P2, P3 [The following information applies to the questions displayed below.] Most Company has an opportunity to invest in one of two new projects. Project Y requires a $335,000 investment for new machinery with a four-year life and no salvage value. Project Z requires a $335,000 investment for new machinery with a three-year life and no salvage value. The...
Problem 25-2A Analysis and computation of payback period, accounting rate of return, and net present value LO P1, P2, P3 The following information applies to the questions displayed below Most Company has an opportunity to invest in one of two new projects. Project Y requires a $315,000 investment for new machinery with a six-year life and no salva five-year life and no salvage value. The two projects yield the following predicted annual results. The company uses ge value. Proj quires...
Required information Problem 24-2A Analysis and computation of payback period, accounting rate of return, and net present value LO P1, P2, P3 (The following information applies to the questions displayed below.) Most Company has an opportunity to invest in one of two new projects. Project Y requires a $335,000 investment for new machinery with a four-year life and no salvage value. Project Z requires a $335,000 investment for new machinery with a three-year life and no salvage value. The two...
Most Company has an opportunity to invest in one of two new projects. Project Y requires a $335,000 investment for new machinery with a four-year life and no salvage value. Project Z requires a $335,000 investment for new machinery with a three-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. (PV of $1, FV of $1, PVA of $1, and FVA...
Problem 24-2A Analysis and computation of payback period, accounting rate of return, and net present value LO P1, P2, P3 [The following information applies to the questions displayed below.] Most Company has an opportunity to invest in one of two new projects. Project Y requires a $335,000 investment for new machinery with a five-year life and no salvage value. Project Z requires a $335,000 investment for new machinery with a four-year life and no salvage value. The two projects yield...
Problem 25-2A Analysis and computation of payback period, accounting rate of return, and net present value LO P1, P2, P3 [The following information applies to the questions displayed below.] Most Company has an opportunity to invest in one of two new projects. Project Y requires a $310,000 investment for new machinery with a four-year life and no salvage value. Project Z requires a $310,000 investment for new machinery with a three-year life and no salvage value. The two projects yield...
Problem 24-2A Analysis and computation of payback period accounting rate of return and net present value P1 P2 P3 Most Company has an opportunity to invest in one of two new projects Project Y requires a $350,000 invest- ment 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 life and no salvage value. The two projects yield the following predicted an- nual results. The company uses...
Discount rate is 9% of 4 Required information Problem 11-2A Analyzing and computing payback period, accounting rate of return, and net present value LO P1, P2, P3 [The following information applies to the questions displayed below.) Most Company has an opportunity to invest in one of two new projects. Project Y requires a $345,000 investment for new machinery with a four-year life and no salvage value. Project Z requires a $345,000 investment for new machinery with a three-year life and...
Required information Problem 25-2A Analysis and computation of payback period, accounting rate of return, and net present value LO P1, P2, P3 [The following information applies to the questions displayed below.] Most 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 life and no salvage value. The two...
Required information [The following information applies to the questions displayed below. Most Company has an opportunity to invest in one of two new projects. Project Y requires a $305,000 investment for new machinery with a six-year life and no salvage value. Project Z requires a $305,000 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....