An investment of P3M can be made in a business that will produce uniform annual revenue ofP1.2M for five years and then have a salvage value of 10% of the investment. Operations andmaintenance will be P100, 000 per year. Taxes and insurance will be 5% of the first cost peryear. The investor expects to earn not less than 20% before income taxes. Is this a goodinvestment? Use the annual cost method.

Given data, Initial investment = P3M Annual income =P1.2M Salvage value =10% of the investment…

An investment of P3M can be made in a business that will produce uniform annual revenue of P1.2M for five years and then have a salvage value of 10% of the investment. Operations and naintenance will be P100, 000 per year. Taxes and insurance will be 5% of the first cost per vear. The investor expects to earn not less than 20% before income taxes. Is this a good nvestment? Use the annual cost method.

An investment of P3M can be made in a business that will produce uniform annual revenue of P1.2M for five years and then have a salvage value of 10% of the investment. Operations and naintenance will be P100, 000 per year. Taxes and insurance will be 5% of the first cost per vear. The investor expects to earn not less than 20% before income taxes. Is this a good nvestment? Use the annual cost method.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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