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A proposal to buy a new machine to manufacture a new product submitted by the Production Department follows: The new machine cost P1,800,000 with an estimated life of five years and with a salvage value of P500,000 will be depreciated using the Sum of Year's Digit method (SYD). Freight and installation costs are estimated to be P350,000. This machine can be sold for P400,000 after its estimated life. With this machine, P1,250,000 sales will be generated and P550,000 cash expenses will be incurred every year. The expected rate of return of this project is 11% and corporate tax is 25%.   Compute the following: A. Net Cash Outlay (Net Investment Cost) B. Net Cash Inflows (Cash Returns) With solution

A proposal to buy a new machine to manufacture a new product submitted by the Production Department follows: The new machine cost P1,800,000 with an estimated life of five years and with a salvage value of P500,000 will be depreciated using the Sum of Year's Digit method (SYD). Freight and installation costs are estimated to be P350,000. This machine can be sold for P400,000 after its estimated life. With this machine, P1,250,000 sales will be generated and P550,000 cash expenses will be incurred every year. The expected rate of return of this project is 11% and corporate tax is 25%.   Compute the following: A. Net Cash Outlay (Net Investment Cost) B. Net Cash Inflows (Cash Returns) With solution

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A proposal to buy a new machine to manufacture a new product submitted by the Production Department follows: The new machine cost P1,800,000 with an estimated life of five years and with a salvage value of P500,000 will be depreciated using the Sum of Year's Digit method (SYD). Freight and installation costs are estimated to be P350,000. This machine can be sold for P400,000 after its estimated life. With this machine, P1,250,000 sales will be generated and P550,000 cash expenses will be incurred every year. The expected rate of return of this project is 11% and corporate tax is 25%.

 

Compute the following:

A. Net Cash Outlay (Net Investment Cost)

B. Net Cash Inflows (Cash Returns)

With solution

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