Most Company has an opportunity to invest in one of two new projects. Project Y requires a $305,000 investment for new machinery with a four-year life and no salvage value. Project Z requires a $305,000 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. (PV of $1, EV of $1, PVA of $1, and FVA of $1 )(Use appropriate factor(s) from the tables provided.) Project Y Project 2 $385,000 $308,000 Sales Expenses Direct materials Direct labor Overhead including depreciation Selling and administrative expenses Total expenses Pretax income Income taxes (268) 53,900 000 ,רר 138,600 28,000 297,500 87,500 22,750 $ 64,750 38,500 46,200 138,600 27,000 250,300 57,700 15,002 Net income $ 42,698 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.)
Most Company has an opportunity to invest in one of two new projects. Project Y requires a $305,000 investment for new machinery with a four-year life and no salvage value. Project Z requires a $305,000 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. (PV of $1, EV of $1, PVA of $1, and FVA of $1 )(Use appropriate factor(s) from the tables provided.) Project Y Project 2 $385,000 $308,000 Sales Expenses Direct materials Direct labor Overhead including depreciation Selling and administrative expenses Total expenses Pretax income Income taxes (268) 53,900 000 ,רר 138,600 28,000 297,500 87,500 22,750 $ 64,750 38,500 46,200 138,600 27,000 250,300 57,700 15,002 Net income $ 42,698 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.)
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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Transcribed Image Text: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.)
Project Y
Chart values are based on:
6.
i =
6%
Select Chart
Amount
PV Factor
Present Value
Present Value of an Annuity of 1
$
110,683 x
49,147.0000
2$
5,439,737,401
%3D
Present value of cash inflows
5,439,737,401
Present value of cash outflows
(305,000)
Net present value
239,262
Project Z
Chart values are based on:
n =
6%
Select Chart
Amount
PV Factor
Present Value
%D
%24
%24
Transcribed Image Text:Most Company has an opportunity to invest in one of two new projects. Project Y requires a $305,000 investment for new
machinery with a four-year life and no salvage value. Project Z requires a $305,000 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. (PV of $1, FV of $1, PVA of $1, and FVA of $1
)(Use appropriate factor(s) from the tables provided.)
Project Y Project Z
$385,000 $308,000
Sales
Expenses
Direct materials
53,900
77,000
138,600
28,000
297,500
87,500
22,750
$ 64,750
38,500
46,200
138,600
27,000
250,300
57,700
15,002
$ 42,698
Direct labor
Overhead including depreciation
Selling and administrative expenses
Total expenses
Pretax income
Income taxes (26%)
Net income
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.)
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