Question

Most Company has an opportunity to invest in one of two new projects. Project Y requires a $340,000 investment for new machinery with a five-year life and no salvage value. Project Z requires a $340,000 investment for new machinery with a four-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 EVA of $) (Use appropriate factor(s) from the tables provided. Project Y Project z 395,000 $316,000 Sales Expenses 55,300 39,500 79,000 47,400 142,200142,200 28,000 28,000 04,500257,100 58,900 36,20023,560 $54,300 35,340 Direct materials Direct labor Overhead including depreciation Selling and administrative expenses Total expenses Pretax income Income taxes (408) Net income 90,500 2. Determine each project's payback period. Payback Period+ Choose Numerator: Choose Denominator: Payback Period Payback period 0 Project Y Project Z

Answer 1