A plastic manufacturing company produces a product frompolystyrene. Two mixing processes, batch and continuousare available with the following data for each process.BatchContinuousInitial CostPhp 50,000Php 100,000Maintenance cost/yearPhp 10,000Php 36,000Salvage valuePhp 6,000Php 12,000Life time5 years5 yearsCapacity (units/year)1,000,0002,000,000Depreciation8,80017,600The company uses straight line depreciation, pays 48% ofits net income as income tax, and has an after-tax minimumattractive rate of return of 15%. The company has aninfinite market and can sell all of the products itproduces at Php 0.5 per unit.What is the net income for both options assuming presentworth method?

PRESENT WORTH OF BATCH Depreciation = (50,000 - 6000) / 5 = $8800 P{B} = -50,000 - (10,000) (P/A,…

Answered: What is the net income for both options…

Business

Accounting

What is the net income for both options assuming present worth method?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

100%

A plastic manufacturing company produces a product from
polystyrene. Two mixing processes, batch and continuous
are available with the following data for each process.
Batch
Continuous
Initial Cost
Php 50,000
Php 100,000
Maintenance cost/year
Php 10,000
Php 36,000
Salvage value
Php 6,000
Php 12,000
Life time
5 years
5 years
Capacity (units/year)
1,000,000
2,000,000
Depreciation
8,800
17,600
The company uses straight line depreciation, pays 48% of
its net income as income tax, and has an after-tax minimum
attractive rate of return of 15%. The company has an
infinite market and can sell all of the products it
produces at Php 0.5 per unit.
What is the net income for both options assuming present
worth method?

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