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Batasan Company is evaluating a plan to expand its store space due to an expected increase in volume of activities in the coming years. The expansion would cost P350,000. When implemented, the asset would have an annual depreciation of P25,000 and its estimated salvage value at the end of its economic life would be P20,000. The assumed annual increase in sales revenue will P80,000 and cash expenses,P30,000. The company pays income tax at a rate of 30%. Compute the ARR based on average investment.  • 5.00%

Batasan Company is evaluating a plan to expand its store space due to an expected increase in volume of activities in the coming years. The expansion would cost P350,000. When implemented, the asset would have an annual depreciation of P25,000 and its estimated salvage value at the end of its economic life would be P20,000. The assumed annual increase in sales revenue will P80,000 and cash expenses,P30,000. The company pays income tax at a rate of 30%. Compute the ARR based on average investment.  • 5.00%

EBK CONTEMPORARY FINANCIAL MANAGEMENT
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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Batasan Company is evaluating a plan to expand its store space due to an expected increase in volume of activities in the coming years. The expansion would cost P350,000. When implemented, the asset would have an annual depreciation of P25,000 and its estimated salvage value at the end of its economic life would be P20,000. The assumed annual increase in sales revenue will P80,000 and cash expenses,P30,000. The company pays income tax at a rate of 30%. Compute the ARR based on average investment. 
• 5.00%
• 9.46%
• 8.50%
• 7.14%

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