- Ca 36 I Saved Help 2 Garcia Company Can Invest In One Of Two Alternative Projects Project Y Requires A 520 000 Initia 1 (89.31 KiB) Viewed 46 times
CA #36 i Saved Help 2 Garcia Company can invest in one of two alternative projects. Project Y requires a $520,000 initial investment for new machinery with a four-year life and no salvage value. Project Z requires a $492,000 initial investment for new machinery with a three-year life and no salvage value. The two projects yield the following annual results. Cash flows occur evenly within each year. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Annual Amounts Sales of new product Project Y $ 480,000 Project 2 $ 580,000 Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery 206,000 130,000 66,000 216,000 164,000 66,000 Selling, general, and administrative expenses Income $ 78,000 $ 134,000 Required: 1. Compute each project's annual net cash flows. 2. Compute each project's payback period. If the company bases investment decisions solely on payback period, which project will it choose? 3. Compute each project's accounting rate of return. If the company bases investment decisions solely on accounting rate of return, which project will it choose? 4. Compute each project's net present value using 8% as the discount rate. If the company bases investment decisions solely on net present value, which project will it choose? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Compute each project's annual net cash flows. BY P Next > 2 points eBook References Mc Graw Hill < Prev 2 of 2 HH www. Save & Exit Submit
Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Compute each project's annual net cash flows. Project Y Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation Machinery Selling, general, and administrative expenses Income Net cash flow Income 480,000 $ 206,000 130,000 66,000 78,000 Required 1 $ Cash Flow 480,000 480,000 Required 2 > Project Z Income 216,000 164,000 66,000 (446,000) Cash Flow $ 0
Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Compute each project's net present value using 8% as the discount rate. If the company bases investment decisions solely on net present value, which project will it choose? (Do not round intermediate calculations. Round your present value factor to 4 decimals and final answers to the nearest whole dollar.) Project Y Net Cash Flows x Present Value of Annuity at = 8% Present Value of Net Cash Flows Years 1-4 0 Net present value Project Z Net Cash Flows x Present Value of Annuity at = 8% Present Value of Net Cash Flows Years 1-3 $ 0 Net present value If the company bases investment decisions solely on net present value, which project will it choose? < Required 3 Required 4