RCISES . The management of Sisa Fitness Center is planning to replace an old P30,000. The old machine has been depreciated to its salvage value slimming machine which was acquired 5 years ago at a cost of of P4,000. Sisa has found a buyer who is willing to purchase the old slimming machine for P6,000. The new machine will cost P50,000. Incidental costs of installation, freight and insurance will have to be incurred at total cost P10,000. Should the company decide the retain the old slimming machine, the same must be upgraded and subjected to major repairs. The estimated cost of this repairs expense amounts to P8,000. The
RCISES . The management of Sisa Fitness Center is planning to replace an old P30,000. The old machine has been depreciated to its salvage value slimming machine which was acquired 5 years ago at a cost of of P4,000. Sisa has found a buyer who is willing to purchase the old slimming machine for P6,000. The new machine will cost P50,000. Incidental costs of installation, freight and insurance will have to be incurred at total cost P10,000. Should the company decide the retain the old slimming machine, the same must be upgraded and subjected to major repairs. The estimated cost of this repairs expense amounts to P8,000. The
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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![XERCISES
1. The management of Sisa Fitness Center is planning to replace an old
slimming machine which was acquired 5 years ago at a cost of
P30,000. The old machine has been depreciated to its salvage value
of P4,000. Sisa has found a buyer who is willing to purchase the old
slimming machine for P6,000.
The new machine will cost P50,000. Incidental costs of installation,
freight and insurance will have to be incurred at total cost P10,000.
Should the company decide the retain the old slimming machine, the
same must be upgraded and subjected to major repairs. The
estimated cost of this repairs expense amounts to P8,000. The
income tax rate is 30%.
Required:
a. Compute the net cost of investment in the new machine for
decision making purposes.
b. Assuming that instead of selling the old machine for P6,000,
Sisa will sell it only for P3,000. How will this affect the
computation of the net cost of investment?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F21c1bfc4-49dd-4df8-b6b1-63c9fb87ad8f%2F362a8b05-0d6d-49dd-9b97-7c7d621e3fcb%2Fb9x3e6b_processed.jpeg&w=3840&q=75)
Transcribed Image Text:XERCISES
1. The management of Sisa Fitness Center is planning to replace an old
slimming machine which was acquired 5 years ago at a cost of
P30,000. The old machine has been depreciated to its salvage value
of P4,000. Sisa has found a buyer who is willing to purchase the old
slimming machine for P6,000.
The new machine will cost P50,000. Incidental costs of installation,
freight and insurance will have to be incurred at total cost P10,000.
Should the company decide the retain the old slimming machine, the
same must be upgraded and subjected to major repairs. The
estimated cost of this repairs expense amounts to P8,000. The
income tax rate is 30%.
Required:
a. Compute the net cost of investment in the new machine for
decision making purposes.
b. Assuming that instead of selling the old machine for P6,000,
Sisa will sell it only for P3,000. How will this affect the
computation of the net cost of investment?
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