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 four-year life and no salvage value. Project Z requires a $305,000 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 2 $385,000 $308,000 Sales Expenses Direct materials Direct labor Overhead including depreciation Selling and administrative expenses Total expenses 53,900 77,000 138,600 28,000 297,500 87,500 22,750 38,500 46,200 138,600 27,000 250,300 57,700 15,002 Pretax income Income taxes (268) Net income $ 64,750 $ 42,698 Required: 1. Compute each project's annual expected net cash flows. Project Y Project Z Net income 64,750 %24 42,968
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 four-year life and no salvage value. Project Z requires a $305,000 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 2 $385,000 $308,000 Sales Expenses Direct materials Direct labor Overhead including depreciation Selling and administrative expenses Total expenses 53,900 77,000 138,600 28,000 297,500 87,500 22,750 38,500 46,200 138,600 27,000 250,300 57,700 15,002 Pretax income Income taxes (268) Net income $ 64,750 $ 42,698 Required: 1. Compute each project's annual expected net cash flows. Project Y Project Z Net income 64,750 %24 42,968
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
Section: Chapter Questions
Problem 10E: Roberts Company is considering an investment in equipment that is capable of producing more...
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