uild in Metro Manila where the plant would cost P2,000,000. Labor would cost annually P120,000 and annual overhead P40,000. Taxes and insurance would total 5% of the first cost of the plant. The second alternative would be to buil
In building their plant, the officers of the International Leather Company had the choice between alternatives:
One alternative is to build in Metro Manila where the plant would cost P2,000,000. Labor would cost annually P120,000 and annual overhead P40,000. Taxes and insurance would total 5% of the first cost of the plant.
The second alternative would be to build in Bulacan a plant costing P2,250,000. Labor would cost P100,000 and overhead would be P55,000. Taxes and insurances would be 3% of the first cost.
The cost of raw materials would be the same in either plant. If capital must be recovered within 10 years and money is worth at least 20%, which site should the officers of the company choose?
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