An investment of P 270,000 can be made in a project that will produce a uniform annual revenue of P 185,400 for 5 years and having a salvage value of 10% of the investment. Out of pocket costs for operation and maintenance will be P 81,000 per year. Taxes and insurance will be 4% of the first cost per year. The company expects capital to earn not less than 25% before income taxes. Determine the payout period of this investment.
An investment of P 270,000 can be made in a project that will produce a uniform annual revenue of P 185,400 for 5 years and having a salvage value of 10% of the investment. Out of pocket costs for operation and maintenance will be P 81,000 per year. Taxes and insurance will be 4% of the first cost per year. The company expects capital to earn not less than 25% before income taxes. Determine the payout period of this investment.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:An investment of P 270,000 can be made in a project that
will produce a uniform annual revenue of P 185,400 for 5
years and having a salvage value of 10% of the investment.
Out of pocket costs for operation and maintenance will be P
81,000 per year. Taxes and insurance will be 4% of the first
cost per year. The company expects capital to earn not less
than 25% before income taxes. Determine the payout period
of this investment.
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