company is being offered a special coating for the gasoline underground tank in installing in its service stations which will increase the life of the tank from the usual 10 years to 15 years. The cost of the special coating will increase the cost of the P 40,000 – tank to P 58,000. Cost of installation for either of the tanks is P 24,000. If the salvage value for both is zero, and the interest rate is 26%, would you recommend the use of the special co

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter9: Capital Budgeting And Cash Flow Analysis
Section9.A: Depreciation
Problem 1P
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A company is being offered a special coating for the gasoline underground tank in installing in its service stations which will increase the life of the tank from the usual 10 years to 15 years. The cost of the special coating will increase the cost of the P 40,000 – tank to P 58,000. Cost of installation for either of the tanks is P 24,000. If the salvage value for both is zero, and the interest rate is 26%, would you recommend the use of the special coating?
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