2. A chemical plant needs a generating set. After evaluating several offers, the choice was narrowed down to two offers a Diesel engine and a gasoline engine. The Engineering Staff made estimate of life salvage value, operating cost and maintenance cost as follows: Diesel Engine Gasoline Engine Purchase Price P360,000 P205,000 Annual Fuel Cost 40,000 60,000 Maintenance Cost 10,000 15,000 Salvage Value 30,000 5,000 Life Years 12 8 Using the cost of money as 10% and using the straight-line depreciation, calculate the total annual cost for each generating set. Which is preferable? Explain the answer usimg Rate of Return Method,

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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(E7) Hello! Please help me answer this one. Please refer to the given picture/s below for the questions. Please read the instructions and directions very carefully. Double and triple check your answers, previous tutors got it wrong.

 

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Answer no 2 only!

 

1. Choose from the two machines which is more economical.
Machine A
First Cost
P8,000.00
Salvage Value
Annual Operation
3,000
Annual Maintenance
1,200
Taxes and Insurance
3%
Life Years
10
Money is worth at least 16%. Prove your answer using three methods.
2. A chemical plant needs a generating set. After evaluating several offers, the choice was
narrowed down to two offers a Diesel engine and a gasoline engine. The Engineering
Staff made estimate of life salvage value, operating cost and maintenance cost as
follows:
Diesel Engine
Gasoline Engine
Purchase Price
P360,000
P205,000
Annual Fuel Cost
40,000
60,000
Maintenance Cost
10,000
15,000
Salvage Value
30,000
5,000
Life Years
12
8
Using the cost of money as 10% and using the straight-line depreciation, calculate the total
annual cost for each generating set. Which is preferable? Explain the answer usimg Rate of
Return Method.
Machine B
P14,000.00
2,000
2,400
1,000
3%
15
Transcribed Image Text:1. Choose from the two machines which is more economical. Machine A First Cost P8,000.00 Salvage Value Annual Operation 3,000 Annual Maintenance 1,200 Taxes and Insurance 3% Life Years 10 Money is worth at least 16%. Prove your answer using three methods. 2. A chemical plant needs a generating set. After evaluating several offers, the choice was narrowed down to two offers a Diesel engine and a gasoline engine. The Engineering Staff made estimate of life salvage value, operating cost and maintenance cost as follows: Diesel Engine Gasoline Engine Purchase Price P360,000 P205,000 Annual Fuel Cost 40,000 60,000 Maintenance Cost 10,000 15,000 Salvage Value 30,000 5,000 Life Years 12 8 Using the cost of money as 10% and using the straight-line depreciation, calculate the total annual cost for each generating set. Which is preferable? Explain the answer usimg Rate of Return Method. Machine B P14,000.00 2,000 2,400 1,000 3% 15
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