· A young mechanical engineer is considering establishing his own small company. An investment of P400,000 will be required which will be recovered in 15 years. It is estimated that sales will be P800,000 per year and that operating expenses will be as follows. Materials P160,000 per year Labor P280,000 per year Overhead P40,000 +10% of sales per year Selling expense P60,000 The man will give u his regular job paying P216,000 per year and devote full time to the operation of the business; this will result in decreasing labor cost by P40,000 per year, material cost by P28,000 per year and overhead cost by P32,000 per year. If the man expects to earn at least 20% of his capital, should he invest?

· A young mechanical engineer is considering establishing his own small company. An investment of P400,000 will be required which will be recovered in 15 years. It is estimated that sales will be P800,000 per year and that operating expenses will be as follows. Materials P160,000 per year Labor P280,000 per year Overhead P40,000 +10% of sales per year Selling expense P60,000 The man will give u his regular job paying P216,000 per year and devote full time to the operation of the business; this will result in decreasing labor cost by P40,000 per year, material cost by P28,000 per year and overhead cost by P32,000 per year. If the man expects to earn at least 20% of his capital, should he invest?

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 young mechanical engineer is considering establishing
his own small company. An investment of P400,000 will be
required which will be recovered in 15 years.
It is estimated that sales will be P800,000 per year and
that operating expenses will be as follows.
Materials P160,000 per year
Labor P280,000 per year
Overhead P40,000 +10% of sales per year
Selling expense P60,000
The man will give u his regular job paying P216, 000 per
year and devote full time to the operation of the
business; this will result in decreasing labor cost by
P40,000 per year, material cost by P28,000 per year and
overhead cost by P32,000 per year. If the man expects to
earn at least 20% of his capital, should he invest?

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