Problem 26-3A (Algo) Applying payback period, accounting rate of return, and net present value LO P1, P2, P3 Garcia Company can invest in one of two alternative projects. Project Y requires a $400,000 initial investment for new machinery with a four-year life and no salvage value. Project Z requires a $420,000 initial investment for new machinery with a three-year life and no salvage value. The two projects yield the following annual results. Cash flows occur evenly within each year, (py of S1.EV of $1. PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Annual Amounts Project Y Project Sales of new product $ 420,000 $ 520,000 Expenses Materials, labor, and overhead (except depreciation) 204,000 Depreciation-Machinery 100,000 Selling, general, and administrative expenses $ 72,000 194,000 54,000 140,000 54,000 $ 122,000 Income Required: 1. Compute each project's annual net cash flows. 2. Compute each project's payback period. If the company bases investment decisions solely on payback period, which project will it choose? 3. Compute each project's accounting rate of return. If the company bases investment decisions solely on accounting rate of return, which project will it choose? 4. Compute each project's net present value using 6% as the discount rate. If the company bases investment decisions solely on net present value, which project will it choose? Complete this question by entering your answers in the tabs below. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Compute each project's accounting rate of return. If the company bases Investment decisions solely an accounting rate of return, which project will it choose? Accounting Rate of Return Numerator: 1 Denominator Annual income 1 Average total assets Project Y Project Z If the company bases investment decisions solely on accounting rate of return, which project wil it choose? Accounting rate of ratum 0 0 Project 2 FIUUU Chart values are based on: 4 n = 6% 11 Amount PV Factor Select Chart Present Value $ es Net present value Project 2 Chart values are based on: BER n 6% Select Chart Amount X PV Factor Present Value $ 0 Net present value If the company bases investment decisions solely on net present value, which project will it choose