Ysabelle Industries, Inc. has an opportunity to acquire a new equipment to replace one of its existing equipments. The new equipment would cost P900,000 and has a five-year useful life, with a zero terminal disposal price. Variable operating costs would be P1 million per year. The present equipment has a book value of P500,000 and a remaining life of five years. Its disposal price now is P50,000 but would be zero after five years. Variable operating costs would be P1,250,000 per year. Considering the five years in total, but ignoring the time value of money and income taxes. Ysabelle should Select the correct response: Replace due to P350,000 advantage. Not replace due to P100,000 disadvantage. Not replace due to P100,000 disadvantage. Not replace due to P150,000 disadvantage.

Ysabelle Industries, Inc. has an opportunity to acquire a new equipment to replace one of its existing equipments. The new equipment would cost P900,000 and has a five-year useful life, with a zero terminal disposal price. Variable operating costs would be P1 million per year. The present equipment has a book value of P500,000 and a remaining life of five years. Its disposal price now is P50,000 but would be zero after five years. Variable operating costs would be P1,250,000 per year. Considering the five years in total, but ignoring the time value of money and income taxes. Ysabelle should Select the correct response: Replace due to P350,000 advantage. Not replace due to P100,000 disadvantage. Not replace due to P100,000 disadvantage. Not replace due to P150,000 disadvantage.

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 16P: Shao Airlines is considering the purchase of two alternative planes. Plane A has an expected life of...

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