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Capi of PHP 1.5M. The manufacturing company can produce an annua evenue of PHP250,000 for 7 years, but has a salvage value of 7% on the investment. The co: he operation and maintenance will be PHP 130,000 per year. Taxes and insurance will be 13% of t rst year's cost. A man expects the said manufacturing company to earn not less than 28% before ncome taxes.

Capi of PHP 1.5M. The manufacturing company can produce an annua evenue of PHP250,000 for 7 years, but has a salvage value of 7% on the investment. The co: he operation and maintenance will be PHP 130,000 per year. Taxes and insurance will be 13% of t rst year's cost. A man expects the said manufacturing company to earn not less than 28% before ncome taxes.

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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1. A man wants to invest in a manufacturing company with a capital of PHP 1.5M. The manufacturing company can produce an annual revenue of PHP250,000 for 7 years, but has a salvage value of 7% on the investment. The cost of the operation and maintenance will be PHP 130,000 per year. Taxes and insurance will be 13% of the first year's cost. A man expects the said manufacturing company to earn not less than 28% before income taxes. (a) Is this manufacturing company a desirable investment? (b) What is the payback period of the investment?
Transcribed Image Text:1. A man wants to invest in a manufacturing company with a capital of PHP 1.5M. The manufacturing company can produce an annual revenue of PHP250,000 for 7 years, but has a salvage value of 7% on the investment. The cost of the operation and maintenance will be PHP 130,000 per year. Taxes and insurance will be 13% of the first year's cost. A man expects the said manufacturing company to earn not less than 28% before income taxes. (a) Is this manufacturing company a desirable investment? (b) What is the payback period of the investment?
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