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Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $268,000. Project 2 requires an initial investment of $170,000. Annual Amounts Sales of new product Expenses Project 1 Project 2 $ 180,000 $160,000 Materials, labor, and overhead (except depreciation) 85,000 52,000 Depreciation-Machinery 40,000 38,000 Selling, general, and administrative expenses 28,000 40,000 Income $27,000 $ 30,000 (a) Compute each project's annual net cash flow. (b) Compute payback period for each investment. Annual Amounts Income Sales of new product Project 1 Project 2 Cash Flow Income Cash Flow $180,000 $160,000 Expenses Materials, labor, and overhead (except depreciation) 85,000 52,000 Depreciation-Machinery 40,000 38,000 Selling, general, and administrative expenses 28,000 40,000 Income $27,000 $30,000 Net cash flow $0 Payback Period Numerator: / Denominator: Project 1 Project 2 = Payback period = 0 = 0

Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $268,000. Project 2 requires an initial investment of $170,000. Annual Amounts Sales of new product Expenses Project 1 Project 2 $ 180,000 $160,000 Materials, labor, and overhead (except depreciation) 85,000 52,000 Depreciation-Machinery 40,000 38,000 Selling, general, and administrative expenses 28,000 40,000 Income $27,000 $ 30,000 (a) Compute each project's annual net cash flow. (b) Compute payback period for each investment. Annual Amounts Income Sales of new product Project 1 Project 2 Cash Flow Income Cash Flow $180,000 $160,000 Expenses Materials, labor, and overhead (except depreciation) 85,000 52,000 Depreciation-Machinery 40,000 38,000 Selling, general, and administrative expenses 28,000 40,000 Income $27,000 $30,000 Net cash flow $0 Payback Period Numerator: / Denominator: Project 1 Project 2 = Payback period = 0 = 0

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $268,000. Project 2 requires an initial investment of $170,000. Annual Amounts Sales of new product Expenses Project 1 Project 2 $ 180,000 $160,000 Materials, labor, and overhead (except depreciation) 85,000 52,000 Depreciation-Machinery 40,000 38,000 Selling, general, and administrative expenses 28,000 40,000 Income $27,000 $ 30,000 (a) Compute each project's annual net cash flow. (b) Compute payback period for each investment. Annual Amounts Income Sales of new product Project 1 Project 2 Cash Flow Income Cash Flow $180,000 $160,000 Expenses Materials, labor, and overhead (except depreciation) 85,000 52,000 Depreciation-Machinery 40,000 38,000 Selling, general, and administrative expenses 28,000 40,000 Income $27,000 $30,000 Net cash flow $0 Payback Period Numerator: / Denominator: Project 1 Project 2 = Payback period = 0 = 0
Transcribed Image Text:Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $268,000. Project 2 requires an initial investment of $170,000. Annual Amounts Sales of new product Expenses Project 1 Project 2 $ 180,000 $160,000 Materials, labor, and overhead (except depreciation) 85,000 52,000 Depreciation-Machinery 40,000 38,000 Selling, general, and administrative expenses 28,000 40,000 Income $27,000 $ 30,000 (a) Compute each project's annual net cash flow. (b) Compute payback period for each investment. Annual Amounts Income Sales of new product Project 1 Project 2 Cash Flow Income Cash Flow $180,000 $160,000 Expenses Materials, labor, and overhead (except depreciation) 85,000 52,000 Depreciation-Machinery 40,000 38,000 Selling, general, and administrative expenses 28,000 40,000 Income $27,000 $30,000 Net cash flow $0 Payback Period Numerator: / Denominator: Project 1 Project 2 = Payback period = 0 = 0
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