2. Determine Project Y's payback period Project Y Numerator: Initial investment $ Payback Period 1 Denominator: Annual net cash flow 321,000/ S 3. Compute Project Y's accounting rate of return 180,000 Accounting Rate of Return Payback Period 1.78 years
2. Determine Project Y's payback period Project Y Numerator: Initial investment $ Payback Period 1 Denominator: Annual net cash flow 321,000/ S 3. Compute Project Y's accounting rate of return 180,000 Accounting Rate of Return Payback Period 1.78 years
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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![[The following information applies to the questions displayed belad
Project Y requires a $321,000 investment for new machinery wityy vifour-year life and no salvage value. The project
yield
owing annual results. Cash flows occur evenly withit veach year. (
Annual Asounts
Sales of new product
Expenses
Materials, labor, and overhead (except depreciation)
Depreciation-Machinery
Selling, general, and administrative expenses
Incone
2. Determine Project Y's payback period
Project Y
Project Y
Numerator:
Initial investment
$
3. Compute Project Y's accounting rate of return
Not present value
Payback Period
T
Denominator:
7 Annual net cash flow
Numerator
321,000 $
180,000
Accounting Rate of Return
Denominator
Net Cash Flows
Present Value
of Annuity at a
Project Y
$ 375,000
80,250
4. Determine Project Y's net present value using 7% as the discount rate. (Do not round intermediate calculations. Round your
present value factor to 4 decimals and final answers to the nearest whole dollar)
S
$ 99,750
Payback Period
1.78 years
Accounting Rate of Return
Present Value of Net](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa601d621-e592-4c7d-884b-7972203c7fb1%2F5e3fa7f0-1823-4828-9522-1e1987c8f052%2F21wo9eg_processed.jpeg&w=3840&q=75)
Transcribed Image Text:[The following information applies to the questions displayed belad
Project Y requires a $321,000 investment for new machinery wityy vifour-year life and no salvage value. The project
yield
owing annual results. Cash flows occur evenly withit veach year. (
Annual Asounts
Sales of new product
Expenses
Materials, labor, and overhead (except depreciation)
Depreciation-Machinery
Selling, general, and administrative expenses
Incone
2. Determine Project Y's payback period
Project Y
Project Y
Numerator:
Initial investment
$
3. Compute Project Y's accounting rate of return
Not present value
Payback Period
T
Denominator:
7 Annual net cash flow
Numerator
321,000 $
180,000
Accounting Rate of Return
Denominator
Net Cash Flows
Present Value
of Annuity at a
Project Y
$ 375,000
80,250
4. Determine Project Y's net present value using 7% as the discount rate. (Do not round intermediate calculations. Round your
present value factor to 4 decimals and final answers to the nearest whole dollar)
S
$ 99,750
Payback Period
1.78 years
Accounting Rate of Return
Present Value of Net
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