show complete solution, equation and formula used 1. An investment of P270,000 can be made in a project that will produce a uniform annual revenue ofP185,400 for 5 years and then have a salvage value of 10% of the investment. Out-of-pocket costsfor operation and maintenance will be P81,000 per year. Taxes and insurance will be 4% of the firstcost per year. The company expects capital to earn not less than 25% before income taxes. Is this adesirable investment? What is the payback period of investment?

ation and maintenance will be P81,000 per year. Taxes and insurance will year. The company expects capital to earn not less than 25% before incor e investment? What is the payback period of investment?

ation and maintenance will be P81,000 per year. Taxes and insurance will year. The company expects capital to earn not less than 25% before incor e investment? What is the payback period of investment?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

show complete solution, equation and formula used

1. An investment of P270,000 can be made in a project that will produce a uniform annual revenue of
P185,400 for 5 years and then have a salvage value of 10% of the investment. Out-of-pocket costs
for operation and maintenance will be P81,000 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. Is this a
desirable investment? What is the payback period of investment?

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