Para Co. is reviewing the following data relating to an energy saving investment proposal: • Cost P50,000 (nondepreciable) • Residual value at the end of 5 years 10,000 • Present value of an annuity of 1 at 12% for 5 years 3.60 • Present value of 1 due in 5 years at 12% 0.57 What would be the annual savings needed to make the investment realize a 12% yield assuming that Para will realize the residual value at the end of year 5 (as a gain) and that the marginal tax rate is at 30%?

Para Co. is reviewing the following data relating to an energy saving investment proposal: • Cost P50,000 (nondepreciable) • Residual value at the end of 5 years 10,000 • Present value of an annuity of 1 at 12% for 5 years 3.60 • Present value of 1 due in 5 years at 12% 0.57 What would be the annual savings needed to make the investment realize a 12% yield assuming that Para will realize the residual value at the end of year 5 (as a gain) and that the marginal tax rate is at 30%?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 5PA: Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated...

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Para Co. is reviewing the following data relating to an energy saving investment proposal: Cost P50,000 (nondepreciable) Residual value at the end of 5 years 10,000 Present value of an annuity of 1 at 12% for 5 years 3.60 Present value of 1 due in 5 years at 12% 0.57 27. What would be the annual savings needed to make the investment realize a 12% yield assuming that Para will not realize the residual value at the end of year 5? 30. What would be the annual savings needed to make the investment realize a 12% yield assuming that Para will not realize the residual value at the end of year 5 and that the marginal tax rate is at 30%? 35. What would be the annual savings needed to make the investment realize a 12% yield assuming that Para will realize the residual value at the end of year 5 (as a gain) and that the marginal tax rate is at 30%?
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