Answered: First Cost - P5M First cost -…

First Cost - P5M First cost - P8,914,223 Annual operating cost - PO.2M Annual operating cost - P281,740 Service life - 5 years Service life - 6 years Salvage value - P5OT Salvege value - P174.071

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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Question

correct answer: 12,490,317

A firm has two alternatives for the improvement of its current production system. The data are as follows:
Machlne A
Machine B
First Cost - P5M First cost - P8,914,223
Annual operating cost - PO.2M Annual operating cost - P281,740
Service life - 5 years
Service life - 6 years
Salvage value - P50T
Salvage value - P174,071
Using the Present Value (PV) Method and with the firm's interest rate of 24% cpd. annually, what is the PV
of Machine B?

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