.A company is considering constructing a plant to manufacture a proposed new product. The land costs P300,000, the building costs P600,000, the equipment costs P250,000 and P100,000 additional working capital is required. It is expected that the product will result in sales of P750,000 per year for 10 years, at which time the land can be sold for P400,000, the building for P350,000 and the equipment for P50,000. All of the working capital would be recovered at the end of year 10. The annual expenses for labor, materials, and all other items are estimated to total P475,000. If the company requires a MARR of 15% per year on projects of comparable risk, determine if it should invest in the new product line. Evaluate using all methods. a.) ROR

.A company is considering constructing a plant to manufacture a proposed new product. The land costs P300,000, the building costs P600,000, the equipment costs P250,000 and P100,000 additional working capital is required. It is expected that the product will result in sales of P750,000 per year for 10 years, at which time the land can be sold for P400,000, the building for P350,000 and the equipment for P50,000. All of the working capital would be recovered at the end of year 10. The annual expenses for labor, materials, and all other items are estimated to total P475,000. If the company requires a MARR of 15% per year on projects of comparable risk, determine if it should invest in the new product line. Evaluate using all methods. a.) ROR

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 28P: Friedman Company is considering installing a new IT system. The cost of the new system is estimated...

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