E. An initial investment of P20, 000, 000 was put up for a new business that will produce an annual revenue of P12, 000,000 for 15 years and will have a salvage value of P2, 000,000. Annual expenses for its operation and maintenance will amount to P6, 000, 000.lf money is worth 12%, show by computation if this business is profitable or not using FW Method.
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- AN INVESTMENT OF P270,000.00 ON COMPUTER SHOP WILL HAVE THE FOLLOWING DATA: UNIFORM ANNUAL REVENUE-P185,000.00 FOR 5 YEARS OPERATION AND MAINTENANCE-P85,000.00/YEAR TAXES/INSURANCE-5% OF THE FIRST COST SALVAGE VALUE OF THE COMPUTERS AFTER 5 YEARS-10% OF INVESTMENT EXPECTED EARNINGS ON CAPITAL- 25% PROVE THAT THIS INVESTMENT IS JUSTIFIABLE OR NOT BY USING PRESENT WORTH METHOD PLEASE GIVE FULL AND DETAILED SOLUTIONMethods of Economy Studies An investment of P 250,000 can be made in a project that will produce a uniform annual revenue of P 192,800 for 5 years and then have a salvage value of 10% of the first cost. Operation and maintenance will be P 72,000 per year. Taxes and insurance will be 4% of the first cost per year. The company expects capital to earn 20% before income taxes. Show whether or not the investment is justified economically using1. Present Worth (PW) method2. Future Worth (FW) method3. Annual Worth (AW) method4. Rate of Return (ROR) method5. Payback (Payout) methodAN INVESTMENT OF P270,000.00 ON COMPUTER SHOP WILL HAVE THE FOLLOWING DATA: UNIFORM ANNUAL REVENUE-P185,000.00 FOR 5 YEARS OPERATION AND MAINTENANCE-P85,000.00/YEAR TAXES/INSURANCE-5% OF THE FIRST COST SALVAGE VALUE OF THE COMPUTERS AFTER 5 YEARS-10% OF INVESTMENT EXPECTED EARNINGS ON CAPITAL- 25% PROVE THAT THIS INVESTMENT IS JUSTIFIABLE OR NOT BY USING FUTURE WORTH METHOD PLEASE GIVE FULL AND DETAILED SOLUTION
- You need to determine whether a project is profitable or not in a long run. Based on the data given, which of theseprojects will be profitable according to engineering economy methods?a. θ = 3 yrs., Net Value: 0b. Accumulated (without interest) net values of the revenues, expenses and investments after 5 years is +300.c. Accumulated (without interest) net values of the revenues, expenses and investments after 4 years is +100.d. θ = 6 yrs., Net Value: +4004) Which of the following power plants is better investment, assuming 8% interest on the sinking fund and no salvage value in either case, taxes/insurance at 10% and interest on capital at 12%. Use ROR and Present Worth Method. - Coal plant which costs P1M, last 10 years and cost annually P100k to operate. - Fuel-oil plant which costs P800k will last 7 years and cost annually P70k to operate.NO tables, please, only formulas correct answers are: (i) n=12×5=60(months) --> ?0 = £16,775 (ii) L12 = £15,293.38 (iii) a) I13 = 98.4 and C13 = 161.6 --> L13 = L12 − C13 = 15,131.79 b) I14 = 97.36 and C14 = 167.64
- An investment of P 270,000 can be made in a project that will produce a uniform annual revenue of P 185,400 for 5 yrs and then have a salvage value of 10% of the investment. Out of pocket costs for operation and maintenance will be P 81,000 per year. Taxes and insurance will be 4% of the first cost per year. The company expects capital to earn not less than 25% before income taxes. Is this a desirable investment?A food processing plant consumed 600,000 kW of electric energy annually and pays an average ofP2.00 per kWh. A study is being made to generate its own power to supply the plant the energy required, and that the power plant installed would cost P2,000,000. Annual operation andmaintenance,P800,000. Other expenses P100,000 per year. Life of power plant is 15 years; salvage value at the end of life is P200,000 annual taxes and insurances, 6% of first cost; and rate of interest is 15%. Using the sinking fund method for depreciation, determine if the power plant is justifiable. Compute using the present worth, annual worth, and rate of return.A business invests $5000 and initially plans to achieve annual revenue of $1100/yr with $200/yr expenses (starting at the end of ar 1) for ten years. No market value if used for ten years. 1.If at the end of the sixth year, instead, the investment is sold for $1000, calculate the PW, FW and AW for a BTCF MARR of 12%. Is the investment a good one if used this way? Why?
- Lim Bon Fing Y Hermanos Inc has offered for sale its two-storey building in thecommercial district of Cebu City. The building contains two stores on the ground floor anda number of offices on the second floor.A prospective buyer estimates that if he buys this property, he will hold it for about 10years. He estimates that the average receipts from the rental during this period to beP350,000.00 and the average expenses for all purpose in connection with its ownershipand operation (maintenance and repairs, janitorial services, insurance, etc.) to beP135,000.00. He believes that the property can be sold for a net of P2,000,000 at the endof the 10th year. If the rate of return on this type of investment is 7%, determine thecash price of this property for the buyer to recover his investment with a 7% return beforeincome taxes.ANSWER: P2,526,768.61AN INVESTMENT OF P270,000.00 ON COMPUTER SHOP WILL HAVE THE FOLLOWING DATA: UNIFORM ANNUAL REVENUE-P185,000.00 FOR 5 YEARS OPERATION AND MAINTENANCE-P85,000.00/YEAR TAXES/INSURANCE-5% OF THE FIRST COST SALVAGE VALUE OF THE COMPUTERS AFTER 5 YEARS-10% OF INVESTMENT EXPECTED EARNINGS ON CAPITAL- 25% PROVE THAT THIS INVESTMENT IS JUSTIFIABLE OR NOT BY USING ROR METHOD PLEASE GIVE FULL AND DETAILED SOLUTIONP is using an 11% annual interest rate to decide if they should buy Truck A or Truck B. Which truck is more economical to buy, assuming that the two trucks serve similarfunctions and purposes? Use (a) Annual Cost Method (b) Present Worth Method, (c) Rateof Return on Additional Investment method. Formulas to be used: Rate of return on additional investment =(Savings of Benefits / Additional Capital) x 100% ROR≥ MARR (Choose the alternative with larger capital) ROR ≤ MARR (Choose the alternative with lesser capital investment)