You have the opportunity to expand your business by purchasing new equipment for PhP159,000. The equipment has a useful life of nine years. You expect to incur cash fixed costs of PhP96,000 per year to use this new equipment, and you expect to incur cash variable costs in the amount of 10% of cash revenues. Your cost of capital is 12%. a. Calculate the payback period and the discounted payback period for this investment, assuming you will generate PhP140,000 in cash revenues every year.
You have the opportunity to expand your business by purchasing new equipment for PhP159,000. The equipment has a useful life of nine years. You expect to incur cash fixed costs of PhP96,000 per year to use this new equipment, and you expect to incur cash variable costs in the amount of 10% of cash revenues. Your cost of capital is 12%. a. Calculate the payback period and the discounted payback period for this investment, assuming you will generate PhP140,000 in cash revenues every year.
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 1PA: Your company is planning to purchase a new log splitter for is lawn and garden business. The new...
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You have the opportunity to expand your business by purchasing new equipment for PhP159,000. The equipment has a useful life of nine years. You expect to incur cash fixed costs of PhP96,000 per year to use this new equipment, and you expect to incur cash variable costs in the amount of 10% of cash revenues. Your cost of capital is 12%.
a. Calculate the payback period and the discounted payback period for this investment, assuming you will generate PhP140,000 in cash revenues every year.
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