Investment Required Php 50,000,000 Salvage Value after 10 Years Gross Income Annual Operating Costs: Labor Php 18,000,000 Php 2,500,000 Php 1,000,000 Php 1,000,000 Php 500,000 Materials, Licenses, Insurance, etc* Fuel and Other Costs Maintenance Costs

Investment Required Php 50,000,000 Salvage Value after 10 Years Gross Income Annual Operating Costs: Labor Php 18,000,000 Php 2,500,000 Php 1,000,000 Php 1,000,000 Php 500,000 Materials, Licenses, Insurance, etc* Fuel and Other Costs Maintenance Costs

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter9: Capital Budgeting Techniques

Section: Chapter Questions

Problem 10PROB

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Your company has been presented with an opportunity to invest in a project. The facts on the project are presented below: The project is expected to operate as shown for ten years. If management expects to make 15% on its investments before taxes, would you recommend this project? Solve the Problem using Present Worth Method

Investment Required
Php 50,000,000
Salvage Value after 10 Years
Gross Income
Annual Operating Costs:
Labor
Materials, Licenses, Insurance, etc*
Fuel and Other Costs
Php 18,000,000
Php 2,500,000
Php 1,000,000
Php 1,000,000
Php 500,000
Maintenance Costs

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