Garcia Co. can invest in one of two alternative projects. Project Y requires a $360,000 initial investment for new machinery with a four-year life and no salvage value. Project Z requires a $360,000 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. Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Income Project Y $400,000 190,000 90,000 50,000 $70,000 Project Z $500,000 200,000 120,000 50,000 $130,000 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? Page 987 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? 3 3SPM Accounting Il/Nx= DосссE!1aPlus Size Shopping9prod.reader-ui.prod.mheducation.com/epub/sn_8fdbc/data-uuid-291b925e048a4697bf1907e6d3126243Streaming Services Wedding thingsF<584 of 1155 >NMcGraw-Hill Education Campus X@2Research LinksWS→>Garcia Co. can invest in one of two alternative projects. Project Y requires a $360,000 initial investment for new machinery with a four-yearlife and no salvage value. Project Z requires a $360,000 initial investment for new machinery with a three-year life and no salvage value. Thetwo projects yield the following annual results. Cash flows occur evenly within each year.X# 3IncomeeAnnual AmountsSales of new productExpensesMaterials, labor, and overhead (except depreciation)Depreciation MachinerySelling, general, and administrative expensesRequired1. 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 itchoose?Page 9873. Compute each project's accounting rate of return. If the company bases investment decisions solely on accounting rate ofreturn, which project will it choose?d4. Compute each project's net present value using 8% as the discount rate. If the company bases investment decisions solely on net presentvalue, which project will it choose?CClass Wild, Fundamental Accou XC$34rf%5Vt5.0gOll6School ResourcesbyProblem Set Ah&7OuProject Y Project Z$400,000$500,000n190,000200,00090,000 120,00050,00050,000$70,000$130,000Facebook R Games Online - Pl...*8jOiXm- 09kO+<)- O0-рPlay Video Bingo D...411>Aa....+ "1GG?D=-

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FINANCIAL ACCOUNTING

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ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Garcia Co. can invest in one of two alternative projects. Project Y requires a $360,000 initial investment for new machinery with a four-year life and no salvage value. Project Z requires a $360,000 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. Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Income Project Y $400,000 190,000 90,000 50,000 $70,000 Project Z $500,000 200,000 120,000 50,000 $130,000 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? Page 987 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? 3

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Garcia Co. can invest in one of two alternative projects. Project Y requires a $360,000 initial investment for new machinery with a four-year
life and no salvage value. Project Z requires a $360,000 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.
X
# 3
Income
e
Annual Amounts
Sales of new product
Expenses
Materials, labor, and overhead (except depreciation)
Depreciation Machinery
Selling, general, and administrative expenses
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?
Page 987
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?
d
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?
C
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School Resources
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Problem Set A
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Project Y Project Z
$400,000
$500,000
n
190,000
200,000
90,000 120,000
50,000
50,000
$70,000
$130,000
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