Answered: Methods of Economy Studies An…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Methods of Economy Studies

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. Present Worth (PW) method
2. Future Worth (FW) method
3. Annual Worth (AW) method
4. Rate of Return (ROR) method
5. Payback (Payout) method

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Rate of Return (ROR) method
5. Payback (Payout) method

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