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Most Company has an opportunity to invest in one of two new
projects. Project Y requires a $340,000 investment for new
machinery with a sixyear life and no salvage value. Project Z
requires a $340,000 investment for new machinery with a fiveyear
life and no salvage value. The two projects yield the following
predicted annual results. The company uses straightline
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  $  385,000  $  308,000  
Expenses  
Direct materials  53,900  38,500  
Direct labor  77,000  46,200  
Overhead including depreciation  138,600  138,600  
Selling and administrative expenses  28,000  27,000  
Total expenses  297,500  250,300  
Pretax income  87,500  57,700  
Income taxes (26%)  22,750  15,002  
Net income  $  64,750  $  42,698 
4. Determine each project’s net present value using 7% as the discount rate. Assume that cash flows occur at each yearend. (Round your intermediate calculations.)

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