University Of California, Los Angeles Operations And Supply Chain Management Assignment Help - Payback Period,

Question - 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 six-year life and no salvage value. Project Z requires a
$305,000 investment for new machinery with a five-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.

Project Y Project Z
Sales $ 385,000 $ 325,000
Expenses
Direct materials 53,900 40,625
Direct labor 77,000 48,750
Overhead including
depreciation 138,600 146,250
Selling and
administrative
expenses 28,000 29,000

Total expenses 297,500 ...Read More 264,625

Pretax income 87,500 60,375
Income taxes
(32%) 28,000 19,320

Net income $ 59,500 $ 41,055


1. Compute each project's annual expected net cash flows.

Project Y | Project Z
Net Income: |
Depreciation Expense: |
Expected Net Cash Flows: |

2. Determine each project's payback period.

"Numerator"/"Demominator" = Payback Period
Project Y / =
Project Z / =

3. Compute each project's accounting rate of return.

"Numerator"/"Demominator" = Accounting Rate of Return
Project Y / =
Project Z / =

4.Determine each project's net present value using 10% as the discount rate. Assume that cash flows
occur at each year-end.

Project Y

Chart values are based on: n= i=

Select Chart Amount X Table Factor = Present Value

Net Present Value =

Project Z

Chart values are based on: n= i=

Select Chart Amount X Table Factor = Present Value

Net Present Value = ...Read Less

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