Question

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Saved Help Save 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 $325,000 investment for new machinery with a five-year life and no salvage value. Project Z requires a $325,000 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 S1 FV of S1. PVA of S1, and FVA of S1 (Use appropriate factor(s) from the tables provided.) Sales Expenses Project Y Project Z $375,008 $300,000 Direct material:s Direct labor Overhead including depreciation Selling and administrative expenses 52,500 37,50e 75,888 45,e00 135,080 135,00e 27,00027,e00 Total expenses Pretax income Income taxes (30%) Net income 289,500 244 500 85,50055,580 23,650 16,6 $ 59,858$ 38,850 Required: 1. Compute each project's annual expected net cash flows くPer 10 11 12 13, of 13 11: Next >

Answer 1

Computation of annual expected cash flow
Annual expected cash flow = Net income + Depreciation
			Project Y	Project Z
	Net income		59850	38850
	Depreciation		65000	81250
	Annual cash flow		124850	120100
Depreciation =
	Project Y = 350000/5				65000
	Project Z = 350000/4				81250