A packing equipment that cost P 500,000 will last for 20 years and have a scrap value at that time of P 50,000. Repair will average P 30,000 per year in which the operating expenses to include the operator will be P 20,000 per month. The second packaging equipment will produce twice as many units per year. It costs P 1,500,000 and must be replaced at the end of 25 years at a cost of P 1,000,000. Repairs for this many will average P 25,000 per year and operating expenses will be P 30,000 a month. If money is worth 8% effective, what is the rate of return (%) of the additional investment?
A packing equipment that cost P 500,000 will last for 20 years and have a scrap value at that time of P 50,000. Repair will average P 30,000 per year in which the operating expenses to include the operator will be P 20,000 per month. The second packaging equipment will produce twice as many units per year. It costs P 1,500,000 and must be replaced at the end of 25 years at a cost of P 1,000,000. Repairs for this many will average P 25,000 per year and operating expenses will be P 30,000 a month. If money is worth 8% effective, what is the rate of return (%) of the additional investment?
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 3P
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A packing equipment that cost P 500,000 will last for 20 years and have a scrap value at that time of P 50,000. Repair will average P 30,000 per year in which the operating expenses to include the operator will be P 20,000 per month. The second packaging equipment will produce twice as many units per year. It costs P 1,500,000 and must be replaced at the end of 25 years at a cost of P 1,000,000. Repairs for this many will average P 25,000 per year and operating expenses will be P 30,000 a month. If money is worth 8% effective, what is the
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