Project Y requires a $350,000 investment for new machinery with a four-year life and no salvage value. The project yields the following annual results. Cash flows occur evenly within each year. Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Income Revelant Time Value of Money factors: PV $1 (8%, 4 years): PVA $1 (8%, 4 years): PVAD $1 (8%, 4 years): FV $1 (8%, 4 years): FVA $1 (8%, 4 years): FVAD $1 (8%, 4 years): 0.7350 3.3121 3.5771 1.3605 4.5061 4.8666 Project Y $350,000 157,500 87,500 49,000 $56,000

Project Y requires a $350,000 investment for new machinery with a four-year life and no salvage value. The project yields the following annual results. Cash flows occur evenly within each year. Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Income Revelant Time Value of Money factors: PV $1 (8%, 4 years): PVA $1 (8%, 4 years): PVAD $1 (8%, 4 years): FV $1 (8%, 4 years): FVA $1 (8%, 4 years): FVAD $1 (8%, 4 years): 0.7350 3.3121 3.5771 1.3605 4.5061 4.8666 Project Y $350,000 157,500 87,500 49,000 $56,000

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 3P

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