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

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Accounting

Most Company has an opportunity to invest in one of two new projects. Project Y requires a $345,000 investment for new machinery with a five-year life and no salvage value. Project Z requires a $345,000 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 $ 380,000 $ 304,000
Expenses
Direct materials 53,200 38,000
Direct labor 76,000 45,600
Overhead including depreciation 136,800 136,800
Selling and administrative expenses 27,000 27,000
Total expenses 293,000 247,400
Pretax income 87,000 56,600
Income taxes (38%) 33,060 21,508
Net income $ 53,940 $ 35,092

4. Determine each projects net present value using 9% as the discount rate. Assume that cash flows occur at each year-end. (Round your intermediate calculations.)

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