2. The ABC company is considering constructing a plant to manufacture a proposed new product. The land `costs P15,000,000, the building costs P30,000,000, the equipment costs P12,500,000, and P5,000,000 working capital is required. At the end of 12 years, the land can be sold for P25,000,000, the building for P12,000,000, the equipment for P250,000 and all of the working capital recovered. The annual disbursements for labor, materials, and all other expenses are estimated to cost P23,750,000. If the company requires a minimum return of 25%, what should be the minimum annual sales for 12 years to justify the investment?
2. The ABC company is considering constructing a plant to manufacture a proposed new product. The land `costs P15,000,000, the building costs P30,000,000, the equipment costs P12,500,000, and P5,000,000 working capital is required. At the end of 12 years, the land can be sold for P25,000,000, the building for P12,000,000, the equipment for P250,000 and all of the working capital recovered. The annual disbursements for labor, materials, and all other expenses are estimated to cost P23,750,000. If the company requires a minimum return of 25%, what should be the minimum annual sales for 12 years to justify the investment?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:2. The ABC company is considering constructing a plant to
manufacture a proposed new product. The land `costs P15,000,000, the
building costs P30,000,000, the equipment costs P12,500,000, and
P5,000,000 working capital is required. At the end of 12 years, the land
can be sold for P25,000,000, the building for P12,000,000, the equipment
for P250,000 and all of the working capital recovered. The annual
disbursements for labor, materials, and all other expenses are estimated
to cost P23,750,000. If the company requires a minimum return of 25%,
what should be the minimum annual sales for 12 years to justify the
investment?
Ans. P39,748,560
page 102
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