Most Company has an opportunity to invest in one of two new projects. Project Y requires a $325,000 investment for new machinery with a four-year life and no salvage value. Project Z requires a $325,000 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 Sales $ 370,000 $ 296,000 Expenses Direct materials 51,800 37,000 Direct labor 74,000 44,400 Overhead including depreciation 133,200 133,200 Selling and administrative expenses 26,000 26,000 Total expenses 285,000 240,600 Pretax income 85,000 55,400 Income taxes (38%) 32,300 21,052 Net income $ 52,700 $ 34,348
Most Company has an opportunity to invest in one of two new projects. Project Y requires a $325,000 investment for new machinery with a four-year life and no salvage value. Project Z requires a $325,000 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 Sales $ 370,000 $ 296,000 Expenses Direct materials 51,800 37,000 Direct labor 74,000 44,400 Overhead including depreciation 133,200 133,200 Selling and administrative expenses 26,000 26,000 Total expenses 285,000 240,600 Pretax income 85,000 55,400 Income taxes (38%) 32,300 21,052 Net income $ 52,700 $ 34,348
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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Most Company has an opportunity to invest in one of two new projects. Project Y requires a $325,000 investment for new machinery with a four-year life and no salvage value. Project Z requires a $325,000 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
| Project Y | Project Z | |||||||
| Sales | $ | 370,000 | $ | 296,000 | ||||
| Expenses | ||||||||
| Direct materials | 51,800 | 37,000 | ||||||
| Direct labor | 74,000 | 44,400 | ||||||
| Overhead including depreciation | 133,200 | 133,200 | ||||||
| Selling and administrative expenses | 26,000 | 26,000 | ||||||
| Total expenses | 285,000 | 240,600 | ||||||
| Pretax income | 85,000 | 55,400 | ||||||
| Income taxes (38%) | 32,300 | 21,052 | ||||||
| Net income | $ | 52,700 | $ | 34,348 | ||||
Transcribed Image Text:oblem 26-2A Part 3
-Compute each project's accounting rate of return.
Accounting Rate of Return
Choose Numerator:
Choose Denominator
Accounting Rate of Return
Accounting rate of return
Project Y
0.
Project Z
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