Kabalikat Company has the opportunity to introduce a new product. Kabalikat expects the product to sell for P75 with variable cost per unit of P50. The annual fixed costs, excluding the amount of depreciation is P4,500,000. The company expects to sell 300,000 units. To produce the new product line, the company needs to purchase a new machine that costs P6,000,000. The new machine is expected to last for four years with a very negligible salvage value. The company has a policy of depreciating its machine for both book and tax purposes for four years. The company has a marginal cost of capital of 13.75 percent and is subject to tax rate of 40 percent. The machine’s net present value is: Group of answer choices P928,500 P2,786,100 P150,270 P1,028,900
Kabalikat Company has the opportunity to introduce a new product. Kabalikat expects the product to sell for P75 with variable cost per unit of P50. The annual fixed costs, excluding the amount of depreciation is P4,500,000. The company expects to sell 300,000 units. To produce the new product line, the company needs to purchase a new machine that costs P6,000,000. The new machine is expected to last for four years with a very negligible salvage value. The company has a policy of depreciating its machine for both book and tax purposes for four years. The company has a marginal cost of capital of 13.75 percent and is subject to tax rate of 40 percent. The machine’s net present value is: Group of answer choices P928,500 P2,786,100 P150,270 P1,028,900
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 8P
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Kabalikat Company has the opportunity to introduce a new product. Kabalikat expects the product to sell for P75 with variable cost per unit of P50. The annual fixed costs, excluding the amount of
The machine’s
Group of answer choices
P928,500
P2,786,100
P150,270
P1,028,900
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