John Walker Company is planning to buy a new machine costing Php2,000,000 with a useful life of five years. Its residual value is expected to be 20% of its carrying value at the end of each year. Other data were made available: Expected annual sales revenue Annual out-of-pocket costs Php4,000,000 3,100,000 Income tax rate 40% Required: Determine the following: a. Payback period. b. Payback reciprocal. c. Payback bailout method. d. Accounting rate of return on original investment. e. Accounting rate of return on average investment.

John Walker Company is planning to buy a new machine costing Php2,000,000 with a useful life of five years. Its residual value is expected to be 20% of its carrying value at the end of each year. Other data were made available: Expected annual sales revenue Annual out-of-pocket costs Php4,000,000 3,100,000 Income tax rate 40% Required: Determine the following: a. Payback period. b. Payback reciprocal. c. Payback bailout method. d. Accounting rate of return on original investment. e. Accounting rate of return on average investment.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 17EA: Gardner Denver Company is considering the purchase of a new piece of factory equipment that will...

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