A young graduate wants to invest his savings on a computer rental business. It has been estimated that the investment will cost him Php 200,000, including the space rental, 10 computers and internet connection. He has estimated that each computer will gain profit of Php 20 per day. Assuming that the shop will be open for 320 days in a year, should he invest on the business if he wants MARR of 15% per year for a study period of 5 years?

A young graduate wants to invest his savings on a computer rental business. It has been estimated that the investment will cost him Php 200,000, including the space rental, 10 computers and internet connection. He has estimated that each computer will gain profit of Php 20 per day. Assuming that the shop will be open for 320 days in a year, should he invest on the business if he wants MARR of 15% per year for a study period of 5 years?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 3EB: A restaurant is considering the purchase of new tables and chairs for their dining room with an...

See similar textbooks

Similar questions

A restaurant is considering the purchase of new tables and chairs for their dining room with an initial investment cost of $515,000, and the restaurant expects an annual net cash flow of $103,000 per year. What is the payback period?
Bouvier Restaurant is considering an investment in a grill that costs $140,000, and will produce annual net cash flows of $21,950 for 8 years. The required rate of return is 6%. Compute the net present value of this investment to determine whether Bouvier should invest in the grill.
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?
Evee Cardenas is interested in investing in a women's specialty shop. The cost of the investment is $280,000. She estimates that the return from owning her own shop will be $35,000 per year. She estimates that the shop will have a useful life of 6 years. Assuming a required rate of return of 8%, calculate the NPV for Evee Cardenas' investment. What if the estimated return was $135,000 per year? Calculate the new NPV for Evee Cardenas' investment.
Mr.Andi is a manager at an automation company. As part of his future planning, Mr.Andi plan to manage an investment IDR 100 thousand in the first year and increase this amount is 10% annually. To solve this problem, you have to create a spreadsheet from the data provided to complete your calculations along with the cash flow. Based on the data given: (a) How long will Mr.Andi's account have value in the future of IDR 3,000,000 at a rate of return of 6% per annum? (b) If Mr.Andi counts up to the next 30 years, find the nominal amount in the next 10, 20, and 30 years that Mr. Andi will achieve. The calculation spreadsheet can describe the amount deposited annually.
Kurt wants to have RM25,000 in an investment account four years from now. The account will pay 0.2 percent interest per month. If he saves money every month, starting one month from now, how much will he have to save each month to reach his goal?
Your friend is considering investing in a two-year MBA program. Tuition costs will be $60,000 for two years while living expenses will be $25,000 per year. She has $10,000 in savings, which she can spend on her education, and will need to borrow the rest from her bank. Her annual loan repayment will be $10,500. she currently works as an analyst and makes $60,000 a year; after she gets her degree she hopes to work as a manager for $150,000 a year. How should your friend formulate her problem? What are her all projected costs ? Suggest alternatives to your friend to reduce the uncertainty associated with finding a high-income job to pay off her loan Select a criterion for discriminating among alternatives, and use it to advise your friend on which course of action to pursue Attempt to analyze and compare the alternatives in view of at least one criterion in addition to cost What should your friend do based on the information you and she have generated?
Lenter wishes to have php. 36,000 after 1 year and 3 months to be used for their educational tour. How much should he invest in his account today if the interest rate is 6.5%?
A young mechanical engineer is considering establishing his own small company. An investment of P400,000 will be required which will be recovered in 15 years. It is estimated that sales will be P800,000 per year and that operating expenses will be as follows: Materials 160,000 per yearLabor 280,000 per yearOverhead 40,000 + 10 % of sales per yearSelling Expenses 60,000 The man will give u his regular job paying P216,000 per year and devote full time to the operation of the business; this will result in decreasing labor cost by P40,000 per year, material cost by P28,000 per year and overhead cost by P32,000 per year. If the man expects to earn at least 20% of his capital, should he invest?
A prospective MBA student earns $55,000 per year in her current job and expects that amount to increase by 6% per year. She is considering leaving her job to attend business school for two years at a cost of $30,000 per year. She has been told that her starting salary after business school is likely to be $120,000 and that amount will increase by 15% per year. Consider a time horizon of 10 years, use a discount rate of 10%, and ignore all considerations not explicitly mentioned here. Assume all cash flows occur at the start of each year (i.e., immediate, one year from now, two years from now,..., nine years from now). Also assume that the choice can be implemented immediately so that for the MBA alternative the current year is the first year of business school. What is the net present value of the more attractive choice? Please round your answer to the nearest dollar. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.…
Scott wants to invest RM1,000 for 1 year. At Bank A, his investment will collect 3% interest compounded daily while at Bank B, his investment will collect 3.50% interest compounded monthly. Which bank offers a better return? How much more will he receive by choosing that bank over the other?
A small family business wants to expand and is planning to start an investment, which will cost an initial investment of $50,000. The father is sure that the investment will generate annual cash flows of $11,000 for the next 10 years. In exactly 5 years from now, the machine needs some serious maintenance, which will cost $20,000. At the end of the 10 years, the investment can be sold for $5,000. The MARR (Minimum Attractive Rate of Return) is 12% annual nominal, compounded semi-annually. a) What is the Net Present Value of the investment? $ 1 b) Should the company accept this investment or not?