Question

Most Company has an opportunity to invest in one of two new projects. Project Y requires a $320,000 investment for new machinery with a five-year life and no salvage value. Project Z requires a $320,000 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 FVA of $1) (Use appropriate factor(s) from the tables provided.) Project Y Project Z $360,000 Sales $288,000 Expenses Direct materials 50,400 72,000 129,600 26,000 278,000 82,000 26,240 36,000 43,200 129,600 26,000 234,800 53,200 17,024 Direct labor overhead including depreciation Selling and administrative expenses Total expenses Pretax income Income taxes (328) 55,760 $36,176 Net income Problem 11-2A Part 1 Required: 1. Compute each project's annual expected net cash flows. Project Y Project Z