A mining property is offeredfor sale for P5.7 M. On thebasis of estimated production,an annual return of P800,000is foreseen for a period of 10years. After 10 years, theproperty will be worthless.What annual rate of return is inprospect?

Cost of property = P5,700,000 Annual return = P800,000 Period = 10 Years

Answered: A mining property is offered for sale…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 5PB: Mason, Inc., is considering the purchase of a patent that has a cost of $85000 and an estimated...

See similar textbooks

Similar questions

Gardner Denver Company is considering the purchase of a new piece of factory equipment that will cost $420,000 and will generate $95,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further Instructions on internal rate of return in Excel, see Appendix C.
Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated revenue producing life of 4 years. Falkland has a cost of capital of 8%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?
Mason, Inc., is considering the purchase of a patent that has a cost of $85000 and an estimated revenue producing lite of 4 years. Mason has a required rate of return that is 12% and a cost of capital of 11%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?
If an asset declines in value from 5,000 to 3,500 over nine years, what is the mean annual growth rate in the assets value over these nine years?
Washington-Pacific (W-P) invested $4 million to buy a tract of land and plant some young pine trees. The trees can be harvested in 10 years, at which time W-P plans to sell the forest at an expected price of $8 million. What is W-P’s expected rate of return?
The expected average rate of return for a proposed investment of $5,090,000 in a fixed asset, using straight-line depreciation, a useful life of 20 years, no residual value, and an expected total income of $10,180,000 over the 20 years, is (round to two decimal places) a.20.00% b.1.00% c.10.00% d.40.00%
A property produces a first year NOI of $300,000 which is expected to grow by 3% annually. If the hold period is 3 years, what is the expected sales price based on a terminal capitalization rate of 9% applied to the 4th year NOI? a)3000000 b)3500000 c)3536333 d)3642423
The expected average rate of return for a proposed investment of $6,720,000 in a fixed asset, using straight-line depreciation, a useful life of 20 years, no residual value, and an expected total income of $20,160,000 over the 20 years, is (round to two decimal places) a. 1.50% b. 30.00% c. 60.00% d. 15.00%
A mine is for sale. A mining engineer estimates that, at the current production levels, the mine will yield an annual net income of $100,000 for 20 years, after which the mineral will be exhausted. If an investor’s minimum acceptable rate of return is 10%, what is the maximum amount that this engineer can bid on this property, to remain profitable?
A project is estimated to cost P110,000, last 8 years and have a P15,000 salvagevalue. The annual gross income is expected to average P24,000 and annualexpenses, excluding depreciation, will total P6,000. If capital is earning 10% beforeincome taxes, determine if this is a desirable investment using A. Present Worth Method :B. Future Worth MethodC. Payback Period in years
An equipment which can be purchase for P700,000 is expected to generate a net cash flow of P200,000 annually for five years which is the estimated service life of the equipment. Its salvage value at the end of the service life is estimated to be 5% of its purchased cost. a. What is the rate of return of the initial investment? b. What is the simple pay-back period? c. If the company's minimum attractive rate of return(MARR) is set at 15%, using NPW is this investment acceptable? d. What is the internal rate of return(IRR) of this machine? e. What is the external rate of return(ERR) at the 15% MARR?
The year-end operating and maintenance costs of a certain drilling platform are estimated to be 100000 during the 1st year and to decrease by 2% each year thereafter during its 10-year life. If capital is worth 12%, answer the questions below What is the present worth of all the year-end costs?What is the equivalent uniform annual year-end costs?What is the future of all the year-end costs? Answer ASAP correctly with proper explanation

SEE MORE QUESTIONS

Recommended textbooks for you

Principles of Accounting Volume 2

Accounting

ISBN:

9781947172609

Author:

OpenStax

Publisher:

OpenStax College

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

Cornerstones of Cost Management (Cornerstones Ser…

Accounting

ISBN:

9781305970663

Author:

Don R. Hansen, Maryanne M. Mowen

Publisher:

Cengage Learning

Principles of Accounting Volume 2

Accounting

ISBN:

9781947172609

Author:

OpenStax

Publisher:

OpenStax College

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

Cornerstones of Cost Management (Cornerstones Ser…

Accounting

ISBN:

9781305970663

Author:

Don R. Hansen, Maryanne M. Mowen

Publisher:

Cengage Learning

Financial And Managerial Accounting

Accounting

ISBN:

9781337902663

Author:

WARREN, Carl S.

Publisher:

Cengage Learning,

Managerial Accounting

Accounting

ISBN:

9781337912020

Author:

Carl Warren, Ph.d. Cma William B. Tayler

Publisher:

South-Western College Pub

Essentials of Business Analytics (MindTap Course …

Statistics

ISBN:

9781305627734

Author:

Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Publisher:

Cengage Learning

SEE MORE TEXTBOOKS

A mining property is offered for sale for P5.7 M. On the basis of estimated production, an annual return of P800,000 is foreseen for a period of 10 years. After 10 years, the property will be worthless. What annual rate of return is in prospect?