I have attached a file with a set of questions. The problem contains several of the answers I have already completed, complete instructions are in the Word document. It concerns net cash flows, payback, net present value.
A company would like to invest in one of two new projects.
Project A would be a $330,000 investment for new machinery with a four year life span and zero salvage value. Project B would be a $330,000
investment for new machinery with a three year life span and zero salvage
value. The two projects yield the following predicted annual results. Use
straight-line depreciation, and cash flows occur evenly throughout every
year. B A
Sales $ 400,000 $ 320,0
Direct materials 56,000 Direct labor 80,000 Overhead including depreciation 144,000 Selling and administrative expenses 29,000 Total expenses 309,000 Pretax income 91,000 Income taxes (32%) 29,120 Net income $ 61,880 40,00
0 $ 40,12
0 B A
Sales $ 400,000 $ 320,0
Direct materials 56,000 Direct labor 80,000 Overhead including depreciation 144,000 Selling and administrative expenses 29,000 Total expenses 309,000 Pretax income 91,000 Income taxes (32%) 29,120 40,00
0 Net income $ 61,880 $ 40,12
0 1. Compute the annual expected net cash flows for both projects. Net income for A=
$61,880 and net income for B =$40.120. Compute depreciation expense. 2. Determine payback period project A is cost of investment/annual net cash
flow=payback period Once #1 is completed I will be able to compute this equation
Cost of investment = $330,000 for both A and B 3. Determine: Project Y , n+4, I=7% so PV factor =3.3872, Project Z, n=3, I=7% so
PV factor = 2.6243, determine inflows, outflows and NPV using 7% as discount rate.
This question was answered on: Sep 18, 2020
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