The engineer of a medium scale industry was instructed to prepare to plans to be considered by management to improve their operations. Plan A calls for an initial investment of P200,000 now with an expected salvage value of 20% of the first cost 20 years hence. The operation and maintenance disbursements are estimated to be P15,000 each year and taxes will be 2% of first cost. Plan B calls for an immediate investment of P140,000 and a second investment of P160,000 eight years later. The operation and maintenance disbursements will be P9,000 a year for the initial installation and P8,000 a year for the second installation. At the end of 20 years, the salvage value will be 20% of the investments. Taxes will be 2% of the first cost. Money worth 12%. Using present worth method, which plan will he recommend and by how much more advantageous? O Plan A lower than Plan B by P23,211.82 O Plan B higher than Plan A by P23,211.82 O Plan B lower than Plan A by P23,211.82

The engineer of a medium scale industry was instructed to prepare to plans to be considered by management to improve their operations. Plan A calls for an initial investment of P200,000 now with an expected salvage value of 20% of the first cost 20 years hence. The operation and maintenance disbursements are estimated to be P15,000 each year and taxes will be 2% of first cost. Plan B calls for an immediate investment of P140,000 and a second investment of P160,000 eight years later. The operation and maintenance disbursements will be P9,000 a year for the initial installation and P8,000 a year for the second installation. At the end of 20 years, the salvage value will be 20% of the investments. Taxes will be 2% of the first cost. Money worth 12%. Using present worth method, which plan will he recommend and by how much more advantageous? O Plan A lower than Plan B by P23,211.82 O Plan B higher than Plan A by P23,211.82 O Plan B lower than Plan A by P23,211.82

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter11: Capital Budgeting And Risk

Section: Chapter Questions

Problem 15P

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