A company is considering the purchase of generating set to supply the electrical needs of his office during brownouts. The firstoffer he received is for a gasoline engine driven unit with an estimated life span of 5 years and would cost P52,000. The annualmaintenance cost is estimated to be P8,300.00 annual operating cost would be P27,000 and the salvage value would be P7,200.The second offer the company received is for a diesel engine driven unit with an estimated life span of 10 years, annualmaintenance cost of P5,800.00, annual operation cost of P 18,850 and the salvage value of P11,900 and the unit cost is P98,250.If the company would need the services of the generator for 10 years, which would be better for the company to accept if cost ofmoney is 20%? USE ROR METHOD. IF ROR

Gasoline engine Cost =52000 Annual maintenance and operations =8300+27000=35300 Salvage value =7200…

ffer the company received is for a diesel engine driven unit with an estimated life span of 10 years, annual cost of P5,800.00, annual operation cost of P 18,850 and the salvage value of P11,900 and the unit cost is P98,250. y would need the services of the generator for 10 years, which would be better for the company to accept if cost of 5? USE ROR METHOD. IF ROR

ffer the company received is for a diesel engine driven unit with an estimated life span of 10 years, annual cost of P5,800.00, annual operation cost of P 18,850 and the salvage value of P11,900 and the unit cost is P98,250. y would need the services of the generator for 10 years, which would be better for the company to accept if cost of 5? USE ROR METHOD. IF ROR

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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A company is considering the purchase of generating set to supply the electrical needs of his office during brownouts. The first
offer he received is for a gasoline engine driven unit with an estimated life span of 5 years and would cost P52,000. The annual
maintenance cost is estimated to be P8,300.00 annual operating cost would be P27,000 and the salvage value would be P7,200.
The second offer the company received is for a diesel engine driven unit with an estimated life span of 10 years, annual
maintenance cost of P5,800.00, annual operation cost of P 18,850 and the salvage value of P11,900 and the unit cost is P98,250.
If the company would need the services of the generator for 10 years, which would be better for the company to accept if cost of
money is 20%? USE ROR METHOD. IF ROR<i, USE AWCM

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