Problem 1: An investment of P 250,000 can be made in a project that will produce a uniform annual revenue of P 192,800 for 5 years and then have a salvage value of 10% of the first cost. Operation and maintenance will be P 72,000 per year. Taxes and insurance will be 4% of the first cost per year. The company expects capital to earn 20% before income taxes. Show whether or not the investment is justified economically using 1. PW method 2. FW method 3. AW method 4. ROR method

Problem 1: An investment of P 250,000 can be made in a project that will produce a uniform annual revenue of P 192,800 for 5 years and then have a salvage value of 10% of the first cost. Operation and maintenance will be P 72,000 per year. Taxes and insurance will be 4% of the first cost per year. The company expects capital to earn 20% before income taxes. Show whether or not the investment is justified economically using 1. PW method 2. FW method 3. AW method 4. ROR method

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Problem 1: An investment of P 250,000 can be made in a project that will produce a
uniform annual revenue of P 192,800 for 5 years and then have a salvage value of 10% of
the first cost. Operation and maintenance will be P 72,000 per year. Taxes and insurance
will be 4% of the first cost per year. The company expects capital to earn 20% before
income taxes. Show whether or not the investment is justified economically using
1. PW method
2. FW method
3. AW method
4. ROR method

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