An investment of P2, 700, 000 can be made in a project that will produce a uniform annual revenue of P1, 850, 400 for 5 years and then have a salvage value of 10% of the investment. Out-of-pocket costs for operation and maintenance will be P810, 000 per year. Taxes and insurance will be 4% of the first cost per year. The company expects capital to earn 25% interest before income taxes. Is this a desirable investment? Use the Annual Worth Method.

An investment of P2, 700, 000 can be made in a project that will produce a uniform annual revenue of P1, 850, 400 for 5 years and then have a salvage value of 10% of the investment. Out-of-pocket costs for operation and maintenance will be P810, 000 per year. Taxes and insurance will be 4% of the first cost per year. The company expects capital to earn 25% interest before income taxes. Is this a desirable investment? Use the Annual Worth Method.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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