Atty. Munar invested P280, 000 which will be used in a project that will produce a uniform annual revenue of P180,000 for 5 years and then have a salvage value of 15% of the investment. Out-of-pocket costs for operation and maintenance will be P80,000 per year. Taxes and insurance will 3% of the first cost per year. Atty Munar expects capital to earn not less than 30% before income taxes. Is this a desirable investment? What is the payback period of the investment? (a) Calculate using Rate of Return Method. (b) Calculate using Present Worth Method. (c) Calculate using Future Worth Method. (d) Calculate using Payback Method.

Atty. Munar invested P280, 000 which will be used in a project that will produce a uniform annual revenue of P180,000 for 5 years and then have a salvage value of 15% of the investment. Out-of-pocket costs for operation and maintenance will be P80,000 per year. Taxes and insurance will 3% of the first cost per year. Atty Munar expects capital to earn not less than 30% before income taxes. Is this a desirable investment? What is the payback period of the investment? (a) Calculate using Rate of Return Method. (b) Calculate using Present Worth Method. (c) Calculate using Future Worth Method. (d) Calculate using Payback Method.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 5PB: Mason, Inc., is considering the purchase of a patent that has a cost of $85000 and an estimated...

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