A company is considering to construct a new manufacturing plant. The land costs P15,000,000, the building costs P30,000,000, the equipment costs P12,500,000, and a 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, and the equipment for P250,000. The total annual expenses are estimated to be P23,750,000 while the annual sales is expected to be P38,000,000. If the company requires a minimum return of 25%, is this a good investment? Analyze using the AW, PW, FW, and ROR methods. Also, calculate the payback period of the investment.

A company is considering to construct a new manufacturing plant. The land costs P15,000,000, the building costs P30,000,000, the equipment costs P12,500,000, and a 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, and the equipment for P250,000. The total annual expenses are estimated to be P23,750,000 while the annual sales is expected to be P38,000,000. If the company requires a minimum return of 25%, is this a good investment? Analyze using the AW, PW, FW, and ROR methods. Also, calculate the payback period of the investment.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

A company is considering to construct a new manufacturing plant. The land
costs P15,000,000, the building costs P30,000,000, the equipment costs
P12,500,000, and a 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,
and the equipment for P250,000. The total annual expenses are estimated to
be P23,750,000 while the annual sales is expected to be P38,000,000. If the
company requires a minimum return of 25%, is this a good investment?
Analyze using the AW, PW, FW, and ROR methods. Also, calculate the
payback period of the investment.

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