ABC Corporation is considering a business opportunity that would require an investment of P1,800,000 with an expected life of 10 years. Estimated annual cash inflows for 10 years, net of tax, amounts to P500,000. The salvage value is expected to be P700,000 at the end of the 1st year, P550,000 at the end of 2nd year, P450,000 at the end of the 3rd year, P400,000 at the end of the 4th year, and will decrease by P50,000 every year starting the end of fifth year. Compute the bailout period.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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ABC Corporation is considering a business opportunity that would require an investment of P1,800,000 with an expected life of 10 years. Estimated annual cash inflows for 10 years, net of tax, amounts to P500,000. The salvage value is expected to be P700,000 at the end of the 1st year, P550,000 at the end of 2nd year, P450,000 at the end of the 3rd year, P400,000 at the end of the 4th year, and will decrease by P50,000 every year starting the end of fifth year. Compute the bailout period.

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