A young engineer is considering establishing his own company. An investment pfP500,000 will be required, which will be recovered in 15 ears. It is estimated that sales will be P800,000 per year and the operating expenses will be as follows: Materials P160.000 per year Labor P280.000 per vear Overhead P40.000 + 10% of sales per year Selling expenses P60,000 per year The engineer will give up his regular job paying P216,000 per year and devote full time to the operation of the business; this will result in decreasing labor cost by P40,000 per year, material cost by P28,000 per year, and overhead cost by P32,000 per year. If the engineer expects to earn at least 20% of his capital, should he invest? (Use ROR method for your solution)
A young engineer is considering establishing his own company. An investment pfP500,000 will be required, which will be recovered in 15 ears. It is estimated that sales will be P800,000 per year and the operating expenses will be as follows: Materials P160.000 per year Labor P280.000 per vear Overhead P40.000 + 10% of sales per year Selling expenses P60,000 per year The engineer will give up his regular job paying P216,000 per year and devote full time to the operation of the business; this will result in decreasing labor cost by P40,000 per year, material cost by P28,000 per year, and overhead cost by P32,000 per year. If the engineer expects to earn at least 20% of his capital, should he invest? (Use ROR method for your solution)
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