ABM Enterprise needs a machine for its manufacturing process. The cost of machine is P120,700. The expected useful life of the machine is 6 years, no salvage value. After installation, the machine would increase cash inflows by P38,000 per year. The minimum required rate of return of the company is 16% on all capital investments. You are asked to help the ABM Enterprise in making decision whether to purchase or not to purchase the machine using the following approaches: a. Payback period method b. Net present value method c. Account rate of return

ABM Enterprise needs a machine for its manufacturing process. The cost of machine is P120,700. The expected useful life of the machine is 6 years, no salvage value. After installation, the machine would increase cash inflows by P38,000 per year. The minimum required rate of return of the company is 16% on all capital investments. You are asked to help the ABM Enterprise in making decision whether to purchase or not to purchase the machine using the following approaches: a. Payback period method b. Net present value method c. Account rate of return

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 5PB: Mason, Inc., is considering the purchase of a patent that has a cost of $85000 and an estimated...

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