A firm is charged by Php 150.00 per ton for hauling its raw materials by a trucking company. Forty tons per day are hauled for 300 days a year. It is a desired to install a railway system which would bring down the cost of hauling to Php 6.60 per ton. Maintenance cost is Php 12,000.00 per month. Tax is 1%. Average rate of earning is 20%. A.) If the company has the cash necessary for the installation, would you recommend change? B.) If the company has to float Php 5,000.00 worth of non-callable bonds at 15% that will mature in 10 years to have the capital for the project, would you recommend the change?

A firm is charged by Php 150.00 per ton for hauling its raw materials by a trucking company. Forty tons per day are hauled for 300 days a year. It is a desired to install a railway system which would bring down the cost of hauling to Php 6.60 per ton. Maintenance cost is Php 12,000.00 per month. Tax is 1%. Average rate of earning is 20%. A.) If the company has the cash necessary for the installation, would you recommend change? B.) If the company has to float Php 5,000.00 worth of non-callable bonds at 15% that will mature in 10 years to have the capital for the project, would you recommend the change?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 1E: A firm has the opportunity to invest in a project having an initial outlay of $20,000. Net cash...

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