The MGC Company has a contract with a hauler to transport its naptha requirements of 3,600,000 liter per year from a refinery in Batangas to its site in Paco at a cost of P1.05 per liter. It is proposed that the company buys a tanker with a capacity of 18,000 liters to service its requirements at a first cost of P 8,000,000 life is 6 years and a salvage value of P 800,000. Other expenses are as follows: a.) Diesel fuel at P7.95 per liter and the tanker consumers 120 liter per round trip from Paco to Batangas and back.
The MGC Company has a contract with a hauler to transport its naptha requirements of 3,600,000 liter per year from a refinery in Batangas to its site in Paco at a cost of P1.05 per liter. It is proposed that the company buys a tanker with a capacity of 18,000 liters to service its requirements at a first cost of P 8,000,000 life is 6 years and a salvage value of P 800,000. Other expenses are as follows:
a.) Diesel fuel at P7.95 per liter and the tanker consumers 120 liter per round trip from Paco to Batangas and back.
b.) Lubricating oil servicing is P3,200 per month.
c.) Labor including overtime and
d.) Annual taxes and insurance. 5% of first cost.
e.) General maintenance per year is P40,000
f.) Tires cost P 32,000 per set and will be renewed every 150 round trips.
What should the MGC Company do if a 5% interest rate on investment is included in the analysis?
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