Methods of Economy Studies  An investment of P 250,000 can be made in a project that will produce a uniform annual revenue of P 192,800 for 5 years and then have a salvage value of 10% of the first cost. Operation and maintenance will be P 72,000 per year. Taxes and insurance will be 4% of the first cost per year. The company expects capital to earn 20% before income taxes. Show whether or not the investment is justified economically using 1. Present Worth (PW) method 2. Future Worth (FW) method

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Methods of Economy Studies 

An investment of P 250,000 can be made in a project that will produce a uniform annual revenue of P 192,800 for 5 years and then have a salvage value of 10% of the first cost. Operation and maintenance will be P 72,000 per year. Taxes and insurance will be 4% of the first cost per year. The company expects capital to earn 20% before income taxes. Show whether or not the investment is justified economically using
1. Present Worth (PW) method
2. Future Worth (FW) method
3. Annual Worth (AW) method
4. Rate of Return (ROR) method
5. Payback (Payout) method

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Rate of Return (ROR) method
5. Payback (Payout) method

 

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