A project is estimated to cost P110,000, last 8 years and have a P15,000 salvage value. The annual gross income is expected to average P24,000 and annual expenses, excluding depreciation, will total P6,000. If capital is earning 10% before income taxes, determine if this is a desirable investment using The rate of return method : Annual Worth Method: Present Worth Method : Future Worth Method Payback Period in years:

A project is estimated to cost P110,000, last 8 years and have a P15,000 salvage value. The annual gross income is expected to average P24,000 and annual expenses, excluding depreciation, will total P6,000. If capital is earning 10% before income taxes, determine if this is a desirable investment using The rate of return method : Annual Worth Method: Present Worth Method : Future Worth Method Payback Period in years:

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 5PA: Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated...

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Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated revenue producing life of 4 years. Falkland has a cost of capital of 8%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?
Foster Manufacturing is analyzing a capital investment project that is forecast to produce the following cash flows and net income: The payback period of this project will be: a. 2.5 years. b. 2.6 years. c. 3.0 years. d. 3.3 years.
A project is estimated to cost 110,000, last 8 years and have a 15,000 salvagevalue. The annual gross income is expected to average 24,000 and annualexpenses, excluding depreciation, will total 6,000. If capital is earning 10% beforeincome taxes, determine if this is a desirable investment using: 1. The rate of return method :2. Annual Worth Method:
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Foster Manufacturing is analyzing a capital investment project that is forecast to produce the following cash flows and net income:
Study the information given and determine, based on its Net Present Value (NPV), whether the investment should be favourably considered for acceptance or not.