m 4- Part B (Ch. 1012) Help Save & Exit Submit Required information The followin
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m 4- Part B (Ch. 1012) Help Save & Exit Submit Required information The following information applies to the questions displayed below.] 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 four-year life and no salvage value. Project Z requires a $320,000 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-ine depreciation, and cash flows ) (Use appropriate factorls) from the tables provided.) of 4 occur evenly throughout each $395,00 $316,009 Expenses 55,380 39,500 79,000 47,4 142,20 142,2e Direct 1abor ad includsng depreciation Selling and administrative expenses Pretax incone $ 57,920 37,696 2. Determine each project's payback periodExplanation / Answer
Payback period = Intial Investment / Net cash flow
where, Net cash flow = Net Income + Depreciation
Net cash flow for Project Y = $57,920 + ($320,000 / 4 years) = $137,920
Net cash flow for Project Z = $37,696 + ($320,000 / 3 years) = $144,363
Payback Period Choose Numerator Choose Denominator Payback period Intial Investment / Net cash flow Project Y $320,000 / $137,920 2.32 years Project Z $320,000 / $144,363 2.22 yearsRelated Questions
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