The Molding Department of the Cabuyao, Inc. has been investigating the possibility of acquiring a new unit of equipment at a cost of P120,000. Cash cost savings before income tax from the use of this equipment has been estimated at P50,000 a year for a period of 4 years. At the end of 4 years, the equipment will have no salvage value. The minimum acceptable rate is 12% discounted rate. REQUIRED: 1. Calculate the NPV under straight-line under straight-line depreciation. 2. Calculate the NPV under SYD depreciation. 3. Explain how a bookkeeping method can help to improve the rating of a capital investment project.
The Molding Department of the Cabuyao, Inc. has been investigating the possibility of acquiring a new unit of equipment at a cost of P120,000. Cash cost savings before income tax from the use of this equipment has been estimated at P50,000 a year for a period of 4 years. At the end of 4 years, the equipment will have no salvage value. The minimum acceptable rate is 12% discounted rate. REQUIRED: 1. Calculate the NPV under straight-line under straight-line depreciation. 2. Calculate the NPV under SYD depreciation. 3. Explain how a bookkeeping method can help to improve the rating of a capital investment project.
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
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:The Molding Department of the Cabuyao, Inc. has been investigating the
possibility of acquiring a new unit of equipment at a cost of P120,000. Cash cost
savings before income tax from the use of this equipment has been estimated at
P50,000 a year for a period of 4 years. At the end of 4 years, the equipment will
have no salvage value. The minimum acceptable rate is 12% discounted rate.
REQUIRED:
1. Calculate the NPV under straight-line under straight-line depreciation.
2. Calculate the NPV under SYD depreciation.
3. Explain how a bookkeeping method can help to improve the rating of a capital
investment project.
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