It is estimated that the insulation of steam pipes in a factory will reduce the fuel bill by as much as 20%. The cost of the insulation is P120,000, and the annual cost of taxes and insurance is 5% of the initial cost. Without the insulation, the annual fuel bill is P190,000. If the insulation is worthless after 6 years, and a minimum return is 12%, would it be worthwhile to invest in the insulation? Use the following methods: a) Present Worth Method; b) Future Worth Method; c) Annual Worth Method; d) Rate of Return; and e) Internal Rate of Return.
It is estimated that the insulation of steam pipes in a factory will reduce the fuel bill by as much as 20%. The cost of the insulation is P120,000, and the annual cost of taxes and insurance is 5% of the initial cost. Without the insulation, the annual fuel bill is P190,000. If the insulation is worthless after 6 years, and a minimum return is 12%, would it be worthwhile to invest in the insulation? Use the following methods: a) Present Worth Method; b) Future Worth Method; c) Annual Worth Method; d) Rate of Return; and e) Internal Rate of Return.
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter17: Long-term Investment Analysis
Section: Chapter Questions
Problem 6E
Related questions
Question
It is estimated that the insulation of steam pipes in a factory will reduce the fuel bill by as much as 20%. The cost of the insulation is P120,000, and the annual cost of taxes and insurance is 5% of the initial cost. Without the insulation, the annual fuel bill is P190,000. If the insulation is worthless after 6 years, and a minimum return is 12%, would it be worthwhile to invest in the insulation? Use the following methods: a) Present Worth Method; b) Future Worth Method; c) Annual Worth Method; d)
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Recommended textbooks for you
Managerial Economics: Applications, Strategies an…
Economics
ISBN:
9781305506381
Author:
James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc
Managerial Economics: Applications, Strategies an…
Economics
ISBN:
9781305506381
Author:
James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc
Essentials of Economics (MindTap Course List)
Economics
ISBN:
9781337091992
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Brief Principles of Macroeconomics (MindTap Cours…
Economics
ISBN:
9781337091985
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
