LEIS company is planning to borrow P10.5M for a company expansion and is not sure what the interest rate will be when it applies for the loan. The rate could be as low as 10% per year or as high as 12% per year for a 5-year loan. LEIS company will only move forward with the project if the annual worth of the expansion is below P5.7M. The maintenance and operation cost is P3.1M per year. The salvage value could be P2M if the interest rate is 10% or P2.5M if it is 12% per year. Use annual worth method to determine the value of each option ANSWER for ALTERNATIVE A: Blank 1 ANSWER for ALTERNATIVE B: Blank 2

LEIS company is planning to borrow P10.5M for a company expansion and is not sure what the interest rate will be when it applies for the loan. The rate could be as low as 10% per year or as high as 12% per year for a 5-year loan. LEIS company will only move forward with the project if the annual worth of the expansion is below P5.7M. The maintenance and operation cost is P3.1M per year. The salvage value could be P2M if the interest rate is 10% or P2.5M if it is 12% per year. Use annual worth method to determine the value of each option ANSWER for ALTERNATIVE A: Blank 1 ANSWER for ALTERNATIVE B: Blank 2

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 17P: The Perez Company has the opportunity to invest in one of two mutually exclusive machines that will...

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LEIS company is planning to borrow P10.5M for a company expansion and is not sure what the interest rate will be when it applies for the loan. The rate could be as low as 10% per year or as high as 12% per year for a 5-year loan. LEIS company will only move forward with the project if the annual worth of the expansion is below P5.7M. The maintenance and operation cost is P3.1M per year. The salvage value could be P2M if the interest rate is 10% or P2.5M if it is 12% per year. Use annual worth method to determine the value of each option ANSWER for ALTERNATIVE A: Blank 1 ANSWER for ALTERNATIVE B: Blank 2