Calculate the capitalized cost of a project that hasan initial cost of P3,000,000 and an additional costof P1,000,000 at the end of every ten years. Theannual operating cost will be P100,000 at the end ofevery year for the first four years and P160,000thereafter. In addition, there is expected to berecurring major rework cost of P300,000 every 13years. Assume i=15%.Show complete manual computation with cashflow diagram.

A capitalized cost refers to the cost which is summed up to the cost basis of a fixed asset of the…

culate the capitalized cost of a project th: nitial cost of P3,000,000 and an additiona P1,000,000 at the end of every ten years. al operating cost will be P100,000 at the ery year for the first four years and P160, ereafter. In addition, there is expected to urring major rework cost of P300,000 eve

culate the capitalized cost of a project th: nitial cost of P3,000,000 and an additiona P1,000,000 at the end of every ten years. al operating cost will be P100,000 at the ery year for the first four years and P160, ereafter. In addition, there is expected to urring major rework cost of P300,000 eve

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: The cost od the project is $2,100,000. It will produce future cash flows of $1,300,000 for 2 years.…

A: The Internal Rate of Return (IRR) of the project, we need to find the discount rate at which the net…

Q: Which of the following sentences contains a series that is not parallel?

A: ANSWER: Which of the following sentences contains a series that is not parallel? Let us first…

Q: Determine the Rate of Return (ROR) for the following project. Initial Capital Investment (P) =…

A: The expected return is the minimum required rate of return which an investor required from the…

Q: Expenses for water treatment plant are expected to be $220,000 now, $110,000 in year one, and…

A: Annualised cost is cost of current year and interest cost of perpetual cost.

Q: Find present amount or capitalized cost and A values at i= 5% of long-term public project if…

A: Capitalized cost of projects is the present value of the all cost including the initial cost of…

Q: A project requires a $2,930,000 initial investment for new machinery with a five-year life and a…

A: Accounting rate of return is calculated by dividing the Annual income by the Average investment.

Q: Carla Vista's Custom Construction Company is considering three new projects, each requiring an…

A: Given information: Three new projects are given , namely, AA, BB and CC. The duration is 3 years for…

Q: What equation gives the capitalized cost at 8% interest of the structure described below? Initial…

A: Before giving equation first we find out the meaning of terms given in question Initial cost:- The…

Q: What is the interest earned on a project that requires an initial investment of $ 10,000 and…

A: Initial investment (PV) = $ 10,000 Future value (FV) = $ 20,114 Period (n) = 5 Years

Q: An investment has an installed cost of $527,630. The cash flows over the four-year life of the…

A: NPV is one of the capital budgeting techniques to evaluate the acceptability of a project. NPV…

Q: A project with the following costs are under consideration to determine its profitability. Using the…

A: Project Cash Flows:Year 0: Initial Cost = -$45,000Year 0.5 to Year 7.5 (8 semiannual…

Q: A project has an initial cost of $150,000. The annual operating cost is $8000 for the first 4 years…

A: Capitalized costs are those expenses of the company that it not recognized in the year they are…

Q: What is the capitalized cost of the project with interest rate 10% per year compounded monthly? The…

A: Present value of annuity is the current value of the future payments that are calculated using the…

Q: A project with the following costs are under consideration to determine its profitability. Using the…

A: To determine if the project should be executed, we need to calculate the Internal Rate of Return…

Q: The cost of the project is $100,000. You expect the project to make $500,000 in 7years (CF of year 7…

A: The IRR for this project is C) 22.01%Explanation:To find the Internal Rate of Return (IRR) for the…

Q: Project A costs $67775, its expected net cash inflows are $10000 per year for 10 years, and its WACC…

Q: Compute the payback statistic for Project A if the appropriate cost of capital is 7 percent and the…

A: Calculation of Payback Period:The payback period is 2.48 years.The project should be Accepted since…

Q: Projects A and B have first costs of $5,000 and $9,000 respectively. • Project A has net annual…

A: The present value is the value of the sum received at time 0 or the current period. It is the value…

Q: For the following project, compute an EAA: Project A requires you an upfront payment of $212872…

A: The equivalent annual annuity approach is the method of capital budgeting that evaluates the…

Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Calculate the capitalized cost of a project that has
an initial cost of P3,000,000 and an additional cost
of P1,000,000 at the end of every ten years. The
annual operating cost will be P100,000 at the end of
every year for the first four years and P160,000
thereafter. In addition, there is expected to be
recurring major rework cost of P300,000 every 13
years. Assume i=15%.
Show complete manual computation with cash
flow diagram.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

You are evaluating three mutually exclusive public-works projects with the respective costs and benefits included in the table below. The useful life of each of the projects is 30 years and MARR is 12% annually. Should any of the projects be selected? (Hint: use incremental B-C Analysis) A B C Capital Investment $10,500,000 $12,000,000 $14,000,000 Annual Operating and Maintenance Costs $850,000 $925,000 $930,000 Market Value $1,350,000 $1,950,000 $2,100,000 Annual Benefit $2,250,000 $2,565,000 $2,700,000
IRR A project has an initial cost of $55,000, expected net cash inflows of $11,000 per year for 10 years, and a cost of capital of 10%. What is the project's IRR? Round your answer to two decimal places. %
IRR A project has an initial cost of $45,000, expected net cash inflows of $10,000 per year for 8 years, and a cost of capital of 10%. What is the project's IRR? Round your answer to two decimal places. %
Compute the payback statistic for Project A if the appropriate cost of capital is 7 percent and the maximum allowable payback period is four years. (Round your answer to 2 decimal places.) Project A Time: 0 1 2 3 4 5 Cash flow: −$2,300 $870 $870 $780 $560 $360
Compute the payback statistic for Project A if the appropriate cost of capital is 9 percent and the maximum allowable payback period is four years. (Round your answer to 2 decimal places.) Project A Time: 0 1 2 3 4 5 Cash flow: −$2,100 $790 $810 $740 $520 $320 Payback: ? Years
h
Project A requires a $405,000 initial investment for new machinery. Project A is expected to yield income of $25,200 per year and net cash flow of $97,600 per year for the next five years. Compute Project A's payback period. Payback Period Numerator: = +/ = = Denominator: Payback Period Payback period 0 Please provide detailed solution
One project with initial cost of 29350 is expedited to generate cash flows of 7200 9300 9400 8300 and 8000 over each of the next five years respectively. What is the projects playback period?
Boomerang Bungee Corp. is considering the following project. Determine the equal annual annuity for the project if the cost of capital is 14%. Initial Investment: $75,000 Year Cash Inflows 1 $30,000 2 $35,000 3 $40,000 a. $2,259.62 b. $4,355.25 c. $7,768.67 d. $5,527.89