Answered: First cost $75,000 Annual revenues…

Business

Accounting

First cost $75,000 Annual revenues 26,000 Annual costs 13,500 Salvage value Useful life 15,000 10 years

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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

A project under consideration by PHI Inc. is summarized. The company uses straight-line depreciation, pays taxes at the 30% marginal rate, and requires an after-tax MARR of 12%. Use net present worth to determine whether the project should be undertaken.

First cost
$75,000
Annual revenues 26,000
Annual costs
13,500
Salvage value
Useful life
15,000
10 years

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