An organization is planning to put up its own building. Two proposals being considered are: A. The construction of the building now to cost P 400,000 B. The construction of a smaller building now to cost P300,000 and at the end of 5 years, an extension to be added to cost P 200,000. By how much is proposal B more economical than proposal A if interest rate is 20% and depreciation to be neglected?

An organization is planning to put up its own building. Two proposals being considered are: A. The construction of the building now to cost P 400,000 B. The construction of a smaller building now to cost P300,000 and at the end of 5 years, an extension to be added to cost P 200,000. By how much is proposal B more economical than proposal A if interest rate is 20% and depreciation to be neglected?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 10P

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