1. A man wants to invest in a manufacturing company with a capita of PHP 1.5M. The manufacturing company can produce an annual revenue of PHP250,000 for 7 years, but has a salvage value of 7% on the investment. The cost the operation and maintenance will be PHP 130,000 per year. Taxes and insurance will be 13% of the irst year's cost. A man expects the said manufacturing company to earn not less than 28% before ncome taxes.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
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1. A man wants to invest in a manufacturing company with a capital
of PHP 1.5M. The manufacturing company can produce an annual
revenue of PHP250,000 for 7 years, but has a salvage value of 7% on the investment. The cost of
the operation and maintenance will be PHP 130,000 per year. Taxes and insurance will be 13% of the
first year's cost. A man expects the said manufacturing company to earn not less than 28% before
income taxes.
(a) Is this manufacturing company a desirable investment?
(b) What is the payback period of the investment?
Transcribed Image Text:1. A man wants to invest in a manufacturing company with a capital of PHP 1.5M. The manufacturing company can produce an annual revenue of PHP250,000 for 7 years, but has a salvage value of 7% on the investment. The cost of the operation and maintenance will be PHP 130,000 per year. Taxes and insurance will be 13% of the first year's cost. A man expects the said manufacturing company to earn not less than 28% before income taxes. (a) Is this manufacturing company a desirable investment? (b) What is the payback period of the investment?
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