An investment of P3M can be made in a business that will produce uniform annual revenue of P1.2M for five years and then have a salvage value of 10% of the investment. Operations and maintenance will be P100, 000 per year. Taxes and insurance will be 5% of the first cost per year. The investor expects to earn not less than 20% before income taxes. Is this a good investment? Use the annual cost method.
An investment of P3M can be made in a business that will produce uniform annual revenue of P1.2M for five years and then have a salvage value of 10% of the investment. Operations and maintenance will be P100, 000 per year. Taxes and insurance will be 5% of the first cost per year. The investor expects to earn not less than 20% before income taxes. Is this a good investment? Use the annual cost method.
Chapter4: Time Value Of Money
Section: Chapter Questions
Problem 15PROB
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