Juliana Cardenas, owner of the Baker Company, was approached by a total local dealer of air-conditioning units. The dealer proposed replacing Baker's old cooling system with a modern, more efficient system. The cost of the new system was quoted at P339,000, but it would save P60,000 per year in energy costs. The estimated life of the new machine system is 10 years, with no salvage value expected. Excited over the possibility of saving P60,000 per year and having a more reliable unit, Juliana requested an analysis of the project's economic viability. All capital projects are required to earn at least the firm's cost of capital, which is 8%. There are no income taxes. Suppose that energy savings are less than claimed. What is the minimum annual cash savings that must be realized for the project to earn a rate equal to the firm's cost of capital? b. P 58, 576 Not Selected " C c. P50,521 , Not Selected Incorrect answer: a. P 59,857 Correct Answer: c. P50,521
Juliana Cardenas, owner of the Baker Company, was approached by a total local dealer of air-conditioning units. The dealer proposed replacing Baker's old cooling system with a modern, more efficient system. The cost of the new system was quoted at P339,000, but it would save P60,000 per year in energy costs. The estimated life of the new machine system is 10 years, with no salvage value expected. Excited over the possibility of saving P60,000 per year and having a more reliable unit, Juliana requested an analysis of the project's economic viability. All capital projects are required to earn at least the firm's cost of capital, which is 8%. There are no income taxes. Suppose that energy savings are less than claimed. What is the minimum annual cash savings that must be realized for the project to earn a rate equal to the firm's cost of capital? b. P 58, 576 Not Selected " C c. P50,521 , Not Selected Incorrect answer: a. P 59,857 Correct Answer: c. P50,521
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Transcribed Image Text:air-conditioning
Juliana Cardenas, owner of the Baker Company, was approached by
a total local dealer of
units. The dealer proposed
replacing Baker's old cooling system with a modern, more efficient
system. The cost of the new system was quoted at P339,000, but it
would save P60,000 per year in energy costs. The estimated life of
the new machine system is 10 years, with no salvage value
expected. Excited over the possibility of saving P60,000 per year
and having a more reliable unit, Juliana requested an analysis of the
project's economic viability. All capital projects are required to earn
at least the firm's cost of capital, which is 8%. There are no income
taxes. Suppose that energy savings are less than claimed. What is
the minimum annual cash savings that must be realized for the
project to earn a rate equal to the firm's cost of capital?
b. P 58, 576
Not Selected
F
C
c. P50,521
, Not Selected
Incorrect answer:
a. P 59,857
Correct Answer:
c. P50,521
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