The management of VGA Textile Company is considering of constructing a plant to manufacture a proposed new product. The land costs 15 million pesos, the building costs 30 million pesos, the equipment costs 12.5 million pesos, and 5 million working capital is required. At the end of 12 years, the land can be sold for 25 million, building for 12 million, equipment for 250,000 pesos, and all of the working capital recovered. The total annual expenses are estimated to cost 23,750,000. If the company requires a minimum return of 25% and the annual sales is 39,748,560, determine if the investment is desirable using the annual worth method.
The management of VGA Textile Company is considering of constructing a plant to manufacture a proposed new product. The land costs 15 million pesos, the building costs 30 million pesos, the equipment costs 12.5 million pesos, and 5 million working capital is required. At the end of 12 years, the land can be sold for 25 million, building for 12 million, equipment for 250,000 pesos, and all of the working capital recovered. The total annual expenses are estimated to cost 23,750,000. If the company requires a minimum return of 25% and the annual sales is 39,748,560, determine if the investment is desirable using the annual worth method.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
The management of VGA Textile Company is considering of constructing a plant to manufacture a proposed new product. The land costs 15 million pesos, the building costs 30 million pesos, the equipment costs 12.5 million pesos, and 5 million working capital is required. At the end of 12 years, the land can be sold for 25 million, building for 12 million, equipment for 250,000 pesos, and all of the working capital recovered. The total annual expenses are estimated to cost 23,750,000. If the company requires a minimum return of 25% and the annual sales is 39,748,560, determine if the investment is desirable using the annual worth method. SHOW THE SOLUTION AND DO NOT USE EXCEL.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education