An investment of P270,000 can be made in a project that will produce a uniform annual revenue of P185,400 for 5 years and then have a salvage value of 10% of the investment. Costs and maintenance will be P81,000 per year. Taxes and Insurance will be 4% of the first cost per year. The company expects capital to earn not less than 25% before income taxes. Is this a desirable investment? Use Present worth, Annual worth and Future worth Methods. Also find Payback period.
An investment of P270,000 can be made in a project that will produce a uniform annual revenue of P185,400 for 5 years and then have a salvage value of 10% of the investment. Costs and maintenance will be P81,000 per year. Taxes and Insurance will be 4% of the first cost per year. The company expects capital to earn not less than 25% before income taxes. Is this a desirable investment? Use Present worth, Annual worth and Future worth Methods. Also find Payback period.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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An investment of P270,000 can be made in a project that
will produce a uniform annual revenue of P185,400 for 5 years and
then have a salvage value of 10% of the investment. Costs and
maintenance will be P81,000 per year. Taxes and Insurance will be 4%
of the first cost per year. The company expects capital to earn not less
than 25% before income taxes. Is this a desirable investment?
Use Present worth, Annual worth and Future worth Methods. Also find Payback period.
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