Question 2 (5 points) You have beenconsulted to advice JJJ Corporation on theprojected acquisition of another productionline costing P1 million. The line has anexpected useful life of 5 years without anysalvage value. The company's hurdle rate is20% and the information below were madeavailable to you.Year Estimated Annual Present ValueCash Flow of P1 at 20%1600,0000.912300,0000.763200,0000.63200,0000.53200,0000.441,500,0003.27Assuming that the cash flow is generated evenly duringthe year, Compute for the Net Present Value and youradvice would be

Year Annual Cashflow present Value of P1 at 20% Present Value 1 600,000 0.91…

Answered: Question 2 (5 points) You have been…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 7E

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A company is considering two (2) capital expenditure proposals, X and Y. Both options will generate the new line of product that the company will produce. Both are expected to operate for four (4) years. Only one (1) proposal will be accepted. The following information is provided to you: X Y Acquisition cost P46,000.00 P46,000.00 Life 4 4 Profits after depreciation Year 1 P6,500.00 P4,500.00 Year 2 3,500.00 2,500.00 Year 3 13,500.00 4,500.00 Year 4 -1,500.00 14,500.00 Scrap value 4,000.00 4,000.00 Depreciation is charged on a straight-line basis. Required: Calculate the Payback Period for both proposals. Which proposal fared better? Calculate the ARR for both Which proposal fared better? Which appraisal method will you use to decide on this product?
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