2. A company is considering two types of equipment for power plant. Type A will cost Php 200,000. , requires Php 32,000 per year for power, supplies and maintenance and Php 50,000. annually for labor. Type B will require an investment of Php 300,000 and require Php 24,000 annually for power, supplies and maintenance, but will cost only Php 32,000 per year for labor. Insurance and property taxes total 3% of first cost per year. Payroll taxes (salary tax)are 4% annually. Estimated life of each type of equipment is 10 years and capital is worth 15% before taxes. Which equipment should be purchased?

2. A company is considering two types of equipment for power plant. Type A will cost Php 200,000. , requires Php 32,000 per year for power, supplies and maintenance and Php 50,000. annually for labor. Type B will require an investment of Php 300,000 and require Php 24,000 annually for power, supplies and maintenance, but will cost only Php 32,000 per year for labor. Insurance and property taxes total 3% of first cost per year. Payroll taxes (salary tax)are 4% annually. Estimated life of each type of equipment is 10 years and capital is worth 15% before taxes. Which equipment should be purchased?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 5P

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

year, and overhead cost by Php 8000 per year. If the young engineer expects
to earn at least 20% on his capital, should he invest ?
2.
A company is considering two types of equipment for power plant. Type
A will cost Php 200,000. , requires Php 32,000 per year for power, supplies
and maintenance and Php 50,000. annually for labor. Type B will require an
investment of Php 300,000 and require Php 24,000 annually for power,
supplies and maintenance, but will cost only Php 32,000 per year for labor.
Insurance and property taxes total 3% of first cost per year. Payroll taxes
(salary tax)are 4% annually. Estimated life of each type of equipment is 10
years and capital is worth 15% before taxes. Which equipment should be
purchased?

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