mation for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $229,500. Project 2 requires an initial investment of $156,000. Annual Amounts Project 1 Project 2 Sales of new product $ 148,000 $ 128,000 Expenses Materials, labor, and overhead (except depreciation) 77,000 44,000 Depreciation—Machinery 32,000 30,000 Selling, general, and administrative expenses 20,000
mation for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $229,500. Project 2 requires an initial investment of $156,000. Annual Amounts Project 1 Project 2 Sales of new product $ 148,000 $ 128,000 Expenses Materials, labor, and overhead (except depreciation) 77,000 44,000 Depreciation—Machinery 32,000 30,000 Selling, general, and administrative expenses 20,000
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 $229,500. Project 2 requires an initial investment of $156,000.
| Annual Amounts | Project 1 | Project 2 |
|---|---|---|
| Sales of new product | $ 148,000 | $ 128,000 |
| Expenses | ||
| Materials, labor, and overhead (except |
77,000 | 44,000 |
| Depreciation—Machinery | 32,000 | 30,000 |
| Selling, general, and administrative expenses | 20,000 | 32,000 |
| Income | $ 19,000 | $ 22,000 |
(a) Compute each project’s annual net
(b) Compute payback period for each investment.
Transcribed Image Text: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
Project 1
148,000
77,000
32,000
20,000
19,000
Cash Flow
$
$
Project 2
Income
128,000
44,000
30,000
32,000
22,000
Cash Flow
Transcribed Image Text:Project 1
Project 2
Numerator:
1
Payback Period
Denominator:
=
=
=
Payback period
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