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 maintenance will be P100, 000 per year. Taxes and insurance will be 5% of the first cost per year. The investor expects to earn not less than 20% before income taxes. Is this a good investment? 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 maintenance will be P100, 000 per year. Taxes and insurance will be 5% of the first cost per year. The investor expects to earn not less than 20% before income taxes. Is this a good investment? Use the annual cost method.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 27P

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