1. If the investment is expected to earn revenue of P4,000,000, with cash expenses amounting to P1,500,000 each over its life, What is the payback period in years? 2. If the investment is expected to earn increase revenue by P750,000 annually with cash savings on expenses of P120,000 each over its life, what is the accounting rate of return of this investment? A company is considering an investment in equipment that canproduce more efficiently than the current technology. Theinvestment required is P2,500,000. The equipment is expected tolast for 5 years and can be sold for P200,000 at the end of itsestimated useful life. Discount rate for this type of financing is 12%.

Payback period is the period which is required for the investment or the project to get the…

Answered: If the investment is expected to earn…

If the investment is expected to earn revenue of P4,000,000, with cash expenses amounting to P1,500,000 each over its life, What is the payback period in years?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 10PB: Bouvier Restaurant is considering an investment in a grill that costs $140,000, and will produce...

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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

1. If the investment is expected to earn revenue of P4,000,000, with cash expenses amounting to P1,500,000 each over its life, What is the payback period in years?

2. If the investment is expected to earn increase revenue by P750,000 annually with cash savings on expenses of P120,000 each over its life, what is the accounting rate of return of this investment?

A company is considering an investment in equipment that can
produce more efficiently than the current technology. The
investment required is P2,500,000. The equipment is expected to
last for 5 years and can be sold for P200,000 at the end of its
estimated useful life. Discount rate for this type of financing is 12%.

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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