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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 EVA 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 53,900 000 ,רר 138,600 38,500 46,200 138,600 28,000 27,000 250,300 297,500 Pretax income 87,500 57,700 Income taxes (268) 22,750 15,002 Net income $ 64,750 $ 42,698 Determine each project's payback period.

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 EVA 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 53,900 000 ,רר 138,600 38,500 46,200 138,600 28,000 27,000 250,300 297,500 Pretax income 87,500 57,700 Income taxes (268) 22,750 15,002 Net income $ 64,750 $ 42,698 Determine each project's payback period.

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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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 38,500 46,200 138,600 Direct labor Overhead including depreciation Selling and administrative expenses Total expenses 27,000 250,300 57,700 15,002 Pretax income Income taxes (26%) 22,750 Net income $ 64,750 $ 42,698 2. Determine each project's payback period. Payback Period
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 38,500 46,200 138,600 Direct labor Overhead including depreciation Selling and administrative expenses Total expenses 27,000 250,300 57,700 15,002 Pretax income Income taxes (26%) 22,750 Net income $ 64,750 $ 42,698 2. Determine each project's payback period. Payback Period
2. Determine each project's payback period. Payback Period Choose Numerator: Choose Denominator: Payback Period %3D Cost of investment I Annual net cash flow Payback period %3D Project Y 2$ 138,600 / 2$ 27,000 = 5.13 years Project Z 297,500 22,750 13.08 years %3D %24
Transcribed Image Text:2. Determine each project's payback period. Payback Period Choose Numerator: Choose Denominator: Payback Period %3D Cost of investment I Annual net cash flow Payback period %3D Project Y 2$ 138,600 / 2$ 27,000 = 5.13 years Project Z 297,500 22,750 13.08 years %3D %24
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