Amachine has an initial cost of P 40 000 and an annual maintenance cost of P 5 000. Its useful life is 10yrs and salvage value of P 8000. The annual benefit from purchasing the machine is P 16 000. The effective annual interest rate is 12%. What is the machine's benefit-cost ratio?

Amachine has an initial cost of P 40 000 and an annual maintenance cost of P 5 000. Its useful life is 10yrs and salvage value of P 8000. The annual benefit from purchasing the machine is P 16 000. The effective annual interest rate is 12%. What is the machine's benefit-cost ratio?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 5P

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

A machine has an initial cost of P 40 000 and an annual maintenance cost of P 5 000. Its useful life is
10yrs and salvage value of P 8000. The annual benefit from purchasing the machine is P 16 000. The
effective annual interest rate is 12%. What is the machine's benefit-cost ratio?
Answer:

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