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Most Company has an opportunity to invest in one of two new projects. Project Y requires a

Most Company has an opportunity to invest in one of two new projects. Project Y requires a

Most Company has an opportunity to invest in one of two new projects. Project Y requires a $320,000 investment for new machinery with a five-year life and no salvage value. Project Z requires a $320,000 investment for new machinery with a four-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   $ 385,000     $ 308,000  
Expenses                
Direct materials     53,900       38,500  
Direct labor     77,000       46,200  
Overhead including depreciation     138,600       138,600  
Selling and administrative expenses     28,000       27,000  
Total expenses     297,500       250,300  
Pretax income     87,500       57,700  
Income taxes (28%)     24,500       16,156  
Net income   $ 63,000     $ 41,544  
 

 

Problem 25-2A Part 4

4. Determine each project’s net present value using 7% as the discount rate. Assume that cash flows occur at each year-end. (Round your intermediate calculations.)

 
manish jayant 10-Sep-2020

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