BW Company has determined that it requires a new treatment facility that would clean polluted water waste from its production facilities. The Cabalo water treatment facility has an estimated useful life of 10 years and can purify that water by dispelling about a million gallons of toxic substances per year. Consider the other data below: Revenue Expenditures Salaries P300,000 Plant facility supplies 240,000 Interest Expense (6% of plant costs 216,000 Repairs and Maintenance (5% of plant costs) 180,000 Depreciation Expense 500,000 Capital Expenditures Plant Facilities P3,600,000 Construction Costs 1,000,000 Overhead 400,000 The company is considering an alternative proposal of creating for another plant facility – Gomez water treatment facility. Gomez plant can be acquired at a costs of P4,000,000. The Gomez facility proposed that 25% reduction in the plant facility supplies costs and salaries. Task: Present a narrative recommendation as to which facilities should be constructed or acquired. Support your recommendation with supporting computations presenting your analysis.
BW Company has determined that it requires a new treatment facility that would clean polluted water waste from its production facilities. The Cabalo water treatment facility has an estimated useful life of 10 years and can purify that water by dispelling about a million gallons of toxic substances per year.
Consider the other data below:
|
Revenue Expenditures |
|
|
Salaries |
P300,000 |
|
Plant facility supplies |
240,000 |
|
Interest Expense (6% of plant costs |
216,000 |
|
Repairs and Maintenance (5% of plant costs) |
180,000 |
|
|
500,000 |
|
Capital Expenditures |
|
|
Plant Facilities |
P3,600,000 |
|
Construction Costs |
1,000,000 |
|
|
400,000 |
The company is considering an alternative proposal of creating for another plant facility – Gomez water treatment facility. Gomez plant can be acquired at a costs of P4,000,000. The Gomez facility proposed that 25% reduction in the plant facility supplies costs and salaries.
Task:
Present a narrative recommendation as to which facilities should be constructed or acquired. Support your recommendation with supporting computations presenting your analysis.
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