1. Determine the capitalized cost of a small public market if the structure has a firstcost of P20M, a life of 20 years and a salvage value of P750,000. The annualoperating cost is P150,000. Taxes to be paid is P70,000 annually. Use an interestrate of 7.5%.2. The maintenance cost of equipment is P15,000 per year and its capitalized costat 6% interest is P1.8M. IF the equipment has a salvage value of P30,000 and hasto be renewed at cost after 10 years, find its original cost.3. A company uses a type of truck that costs P2M, with a life of three years and afinal salvage value of P320,000. How much could the company afford to pay foranother type of truck for the same purpose, whose life is four years with a finalsalvage value of P400,000, if money is worth 4%?

Capitalized cost is the technique of recognizing the amount incurred as an expenditure which is…

. Determine the capitalized cost of a small public market if the structure has a fir. ost of P20M, a life of 20 years and a salvage value of P750,000. The annual perating cost is P150,000. Taxes to be paid is P70,000 annually. Use an interest ate of 7.5%.

. Determine the capitalized cost of a small public market if the structure has a fir. ost of P20M, a life of 20 years and a salvage value of P750,000. The annual perating cost is P150,000. Taxes to be paid is P70,000 annually. Use an interest ate of 7.5%.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 5P

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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. Determine the capitalized cost of a small public market if the structure has a first
cost of P20M, a life of 20 years and a salvage value of P750,000. The annual
operating cost is P150,000. Taxes to be paid is P70,000 annually. Use an interest
rate of 7.5%.
2. The maintenance cost of equipment is P15,000 per year and its capitalized cost
at 6% interest is P1.8M. IF the equipment has a salvage value of P30,000 and has
to be renewed at cost after 10 years, find its original cost.
3. A company uses a type of truck that costs P2M, with a life of three years and a
final salvage value of P320,000. How much could the company afford to pay for
another type of truck for the same purpose, whose life is four years with a final
salvage value of P400,000, if money is worth 4%?

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