What is the net present value of the equipment?
At the beginning of the year, JeyKey Corporation purchased a new equipment for P360,000. The machine has an estimated useful life of four (4) years with no salvage value. It is expected to produce
Year 1 P128,000
2 112,000
3 144,000
4 96,000
5 80,000
JeyKey Corporation uses the sum-of-the-years-digits method (SYD) in computing depreciation of its depreciable assets. Using SYD, the new equipment will be
Year 1 (P360,000 x 4/10) P144,000
2 (P360,000 x 3/10) 108,000
3 (P360,000 x 2/10) 72,000
4 (P360,000 x 1/10) 36,000
The company s cost of capital is 10%. The present value factors at 10% are as follows:
End of Year 1 0.909
2 0.826
3 0.751
4 0.683
Total, 4 years
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