Economics: Principles, Problems, & Policies (McGraw-Hill Series in Economics) - Standalone book
20th Edition
ISBN: 9780078021756
Author: McConnell, Campbell R.; Brue, Stanley L.; Flynn Dr., Sean Masaki
Publisher: McGraw-Hill Education
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Chapter 5, Problem 5DQ
To determine
The political incentives to approve the budget deficit.
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3. A project capitalized Php 100,000 invested in depreciable assets will earn a uniform, annual income of Php
25,000 in 10 years. The costs for operation and maintenance total Php 10,000 a year, and taxes and insurance
will cost 5% of the first cost each year. If the company expects its capital to earn 13% before income taxes, is
the investment worthwhile? Use a) AW method; (b) PW method; (c) FW method.
Consider Projects A and B. The expected period of service is 15 years, and the interest rate is 10%
Initial Cost
Annual Operating Cost
Annual Repair Costs
Salvage Value
Project A
Php 50,000
Project B
Php 75,000
15,000
10,000
5,000
3,000
5,000
10,000
Which project would you approve of if a project must be selected using
a. Rate of Return on Additional Method
b. Present Worth Method
c. Equivalent Uniform Annual Cost Method
d. Capitalized Cost
Chapter 5 Solutions
Economics: Principles, Problems, & Policies (McGraw-Hill Series in Economics) - Standalone book
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