Given: The company has set a goal of 25% Rate of Return on any of its investments. For the Existing System, Process A, Investment was equal to P5,600,000.00 and Operation Cost equals P 965,000.00. The company is contemplating on making an alternative Process B, where the Investment equals P7,000,000.00 and with a corresponding Operation Cost of only P325,000.00 Should the proposed alternative be adopted? O"No, since the difference in the relative costing between Process A (which is 965,000/5,600,000 = 17.23 %) and that of the costing for Alternative B (equal to 325,000/7,000,000= 4.6%) is only 12.63% and such 12.63 % is very much lower than the company target of 25 % O"Yes, since the ROI for Process B ia 45.50 %- O"No. Since the Revenues are not given, therefore the Net Cash Inflow or Income could not be determined O"Yes, since the ROI for Process B is 45.71 %*

Given: The company has set a goal of 25% Rate of Return on any of its investments. For the Existing System, Process A, Investment was equal to P5,600,000.00 and Operation Cost equals P 965,000.00. The company is contemplating on making an alternative Process B, where the Investment equals P7,000,000.00 and with a corresponding Operation Cost of only P325,000.00 Should the proposed alternative be adopted? O"No, since the difference in the relative costing between Process A (which is 965,000/5,600,000 = 17.23 %) and that of the costing for Alternative B (equal to 325,000/7,000,000= 4.6%) is only 12.63% and such 12.63 % is very much lower than the company target of 25 % O"Yes, since the ROI for Process B ia 45.50 %- O"No. Since the Revenues are not given, therefore the Net Cash Inflow or Income could not be determined O"Yes, since the ROI for Process B is 45.71 %*

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter11: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

Problem 8P

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