Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $229,500. Project 2 requires an initial investment of $156,000. Annual AmountsProject 1Project 2Sales of new product$ 148,000$ 128,000Expenses Materials, labor, and overhead (except depreciation)77,00044,000Depreciation—Machinery32,00030,000Selling, general, and administrative expenses20,00032,000Income$ 19,000$ 22,000(a) Compute each project’s annual net cash flow.(b) Compute payback period for each investment. Annual AmountsSales of new productExpensesMaterials, labor, and overhead (except depreciation)Depreciation MachinerySelling, general, and administrative expensesIncomeNet cash flow$IncomeProject 1148,00077,00032,00020,00019,000Cash Flow$$Project 2Income128,00044,00030,00032,00022,000Cash Flow Project 1Project 2Numerator:1Payback PeriodDenominator:===Payback period

Payback Period - The term "payback time" refers to the amount of years needed to recoup the initial…

mation for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $229,500. Project 2 requires an initial investment of $156,000. Annual Amounts Project 1 Project 2 Sales of new product $ 148,000 $ 128,000 Expenses Materials, labor, and overhead (except depreciation) 77,000 44,000 Depreciation—Machinery 32,000 30,000 Selling, general, and administrative expenses 20,000

mation for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $229,500. Project 2 requires an initial investment of $156,000. Annual Amounts Project 1 Project 2 Sales of new product $ 148,000 $ 128,000 Expenses Materials, labor, and overhead (except depreciation) 77,000 44,000 Depreciation—Machinery 32,000 30,000 Selling, general, and administrative expenses 20,000

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter8: Investing Activities

Section: Chapter Questions

Problem 1.3AIC: Estimate the average total estimated useful life of depreciable property, plant, and equipment....

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Annual Amounts	Project 1	Project 2
Sales of new product	$ 148,000	$ 128,000
Expenses
Materials, labor, and overhead (except depreciation)	77,000	44,000
Depreciation—Machinery	32,000	30,000
Selling, general, and administrative expenses	20,000	32,000
Income	$ 19,000	$ 22,000

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