(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 $315,000 Investment for new machinery with a four-year life and no salvage value. Project Z requires a $315,000 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. (FV of 1, PV of 1, FVA of 1, and PVA of $1) (Use appropriate factor(s) from the standard factor tables)
Project Y Project Z
Sales $355,000 $284,000
Expenses
Direct materials 49,700 35,500
Direct labor 71,000 42,600
Overhead Including depreciation 127,800 127,800
Selling and administrative expenses 25,000 25,000
Total expenses $273,500 $230,900
Pretax income 81,500 53,100
Income taxes (34%) 27,710 8,054
Net income $53,790 $35,046
Required:
1. Compute each project's annual expected net cash flows.
2. Determine each project's payback period.
3. Compute each project's accounting rate of return.
4. Determine each project's net present value using 10% as the discount rate. Assume that cash flows occur at each year-end. (Round your intermediate calculations.)