A certain newly created company installed a 10,000kW electric generating plant at a cost of P430 per kW. The estimated life of the plant is 15 years. Salvage value is conservatively set at x% of the first cost. The interest on the sinking fund deposit is 3.5%. The accumulated depreciation after 10 years is P2,483,595. a. What percentage of first cost is set as salvage value? b. How much should the electric generating plant be priced at the end of 8 years? c. If the salvage value is increased by 2%, what is the book value after 10 years?

A certain newly created company installed a 10,000kW electric generating plant at a cost of P430 per kW. The estimated life of the plant is 15 years. Salvage value is conservatively set at x% of the first cost. The interest on the sinking fund deposit is 3.5%. The accumulated depreciation after 10 years is P2,483,595. a. What percentage of first cost is set as salvage value? b. How much should the electric generating plant be priced at the end of 8 years? c. If the salvage value is increased by 2%, what is the book value after 10 years?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 2E

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