A company that sells computers has proposed to a small public utility company that it purchased a small electronic computer for ₱1,000,000 to replace ten calculating machines and their operators. An annual service maintenance contract for the computer will be provided at a cost of ₱100,000 per year. One operator will be required at a alary of ₱96,000 per year and one programmer at a salary of ₱144,000 per year. The estimated economical life of the computer is 10 years.The calculating machine cost ₱7,000 each when new, 5 yeas ago and presently can be sold for ₱2,000 each. They have an estimated life of 8 years and an expected ultimate trade in value of ₱1,000 each. Each calculating machine operator receives ₱84,000 per year. Fringe benefits for all labor cost 8% of annual salary. Annual maintenance costs on the calculating machines have been ₱500 each. Taxes and insurance on all equipment is 2% of the first cost per year. IF capital costs the company about 25%, would you recommend the computer installation?
A company that sells computers has proposed to a small public utility company that it purchased
a small electronic computer for ₱1,000,000 to replace ten calculating machines and their
operators. An annual service maintenance contract for the computer will be provided at a cost
of ₱100,000 per year. One operator will be required at a alary of ₱96,000 per year and one
programmer at a salary of ₱144,000 per year. The estimated economical life of the computer is
10 years.The calculating machine cost ₱7,000 each when new, 5 yeas ago and presently can be sold for
₱2,000 each. They have an estimated life of 8 years and an expected ultimate trade in value of
₱1,000 each. Each calculating machine operator receives ₱84,000 per year.
all labor cost 8% of annual salary. Annual maintenance costs on the calculating machines have
been ₱500 each. Taxes and insurance on all equipment is 2% of the first cost per year.
IF capital costs the company about 25%, would you recommend the computer
installation?
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