Project Y requires a $350,000 investment for new machinery with a four-year life and no salvage value. The project yields the following annual results. Cash flows occur evenly within each year. Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Income Revelant Time Value of Money factors: PV $1 (8%, 4 years): PVA $1 (8%, 4 years): PVAD $1 (8%, 4 years): FV $1 (8%, 4 years): FVA $1 (8%, 4 years): FVAD $1 (8%, 4 years): 0.7350 3.3121 3.5771 1.3605 4.5061 4.8666 Project Y $350,000 157,500 87,500 49,000 $56,000
Project Y requires a $350,000 investment for new machinery with a four-year life and no salvage value. The project yields the following annual results. Cash flows occur evenly within each year. Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Income Revelant Time Value of Money factors: PV $1 (8%, 4 years): PVA $1 (8%, 4 years): PVAD $1 (8%, 4 years): FV $1 (8%, 4 years): FVA $1 (8%, 4 years): FVAD $1 (8%, 4 years): 0.7350 3.3121 3.5771 1.3605 4.5061 4.8666 Project Y $350,000 157,500 87,500 49,000 $56,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
![Project Y requires a $350,000 investment for new machinery with a four-year life and no salvage value. The project yields the following annual results.
Cash flows occur evenly within each year.
Annual Amounts
Sales of new product
Expenses
Materials, labor, and overhead (except depreciation)
Depreciation Machinery
Selling, general, and administrative expenses
Income
Revelant Time Value of Money factors:
PV $1 (8%, 4 years):
PVA $1 (8%, 4 years):
PVAD $1 (8%, 4 years):
FV $1 (8%, 4 years):
FVA $1 (8%, 4 years):
FVAD $1 (8%, 4 years):
0.7350
3.3121
3.5771
1.3605
4.5061
4.8666
Project Y
$350,000
157,500
87,500
49,000
$56,000](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F05bb226c-854f-4218-a33d-90f3d00b8c4a%2Fd7b11459-f361-4646-8954-9541b6f08cca%2F2x8vk0b_processed.png&w=3840&q=75)
Transcribed Image Text:Project Y requires a $350,000 investment for new machinery with a four-year life and no salvage value. The project yields the following annual results.
Cash flows occur evenly within each year.
Annual Amounts
Sales of new product
Expenses
Materials, labor, and overhead (except depreciation)
Depreciation Machinery
Selling, general, and administrative expenses
Income
Revelant Time Value of Money factors:
PV $1 (8%, 4 years):
PVA $1 (8%, 4 years):
PVAD $1 (8%, 4 years):
FV $1 (8%, 4 years):
FVA $1 (8%, 4 years):
FVAD $1 (8%, 4 years):
0.7350
3.3121
3.5771
1.3605
4.5061
4.8666
Project Y
$350,000
157,500
87,500
49,000
$56,000
![Required:
1. Determine Project Y's payback period.
2. Compute Project Y's accounting rate of return.
3. Determine Project Y's net present value using 8% as the discount rate. (Do not round intermediate calculations.
Round your final answer to the nearest whole dollar.)
Payback period
2.44 years
Accounting rate of return
Years 1-4
Initial investment
Net present value
Net Cash
Flows
$143,500
32%
X
Present
Value of
Annuity at
3.3121
Present Value of
Net Cash Flows
$475,286
350,000
$125,286](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F05bb226c-854f-4218-a33d-90f3d00b8c4a%2Fd7b11459-f361-4646-8954-9541b6f08cca%2Fei6dumb_processed.png&w=3840&q=75)
Transcribed Image Text:Required:
1. Determine Project Y's payback period.
2. Compute Project Y's accounting rate of return.
3. Determine Project Y's net present value using 8% as the discount rate. (Do not round intermediate calculations.
Round your final answer to the nearest whole dollar.)
Payback period
2.44 years
Accounting rate of return
Years 1-4
Initial investment
Net present value
Net Cash
Flows
$143,500
32%
X
Present
Value of
Annuity at
3.3121
Present Value of
Net Cash Flows
$475,286
350,000
$125,286
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