1. A young engineer is considering establishing his own small company. An investment of Php 100,000 will be required which must be recovered in 15 years . It is estimated that sales will be Php 150,000 per year and that operating expenses will be as follows: Material Php 40,000 per year Labor Php 70,000 per year Overhead Php 10,000 + 10% of sales/year Selling expenses Php 5,000/year The young engineer will give up his regular job paying Php 150,000 per year and devote full time to the operation of the business. This will result in decreasing labor by Php 10,000 per year , material cost by Php 7000 per year, and overhead cost by Php 8000 per year. If the young engineer expects to earn at least 20% on his capital, should he invest ?
1. A young engineer is considering establishing his own small company. An investment of Php 100,000 will be required which must be recovered in 15 years . It is estimated that sales will be Php 150,000 per year and that operating expenses will be as follows: Material Php 40,000 per year Labor Php 70,000 per year Overhead Php 10,000 + 10% of sales/year Selling expenses Php 5,000/year The young engineer will give up his regular job paying Php 150,000 per year and devote full time to the operation of the business. This will result in decreasing labor by Php 10,000 per year , material cost by Php 7000 per year, and overhead cost by Php 8000 per year. If the young engineer expects to earn at least 20% on his capital, should he invest ?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:1.
A young engineer is considering establishing his own small company.
An investment of Php 100,000 will be required which must be recovered in 15
years . It is estimated that sales will be Php 150,000 per year and that
operating expenses will be as follows:
Material
Php 40,000 per year
Labor
Php 70,000 per year
Overhead
Php 10,000 + 10% of sales/year
Selling expenses Php 5,000/year
The young engineer will give up his regular job paying Php 150,000 per year
and devote full time to the operation of the business. This will result in
decreasing labor by Php 10,000 per year , material cost by Php 7000 per
year, and overhead cost by Php 8000 per year. If the young engineer expects
to earn at least 20% on his capital, should he invest ?
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