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
Related questions
Question
SUBJECT:
Number 2
Transcribed Image Text:Question 2
The MGC Company has a contract with a hauler to transport its Naphtha requirements of
3,600,000 liters 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 P8, 000,000 life is 6 years and has a salvage value of P800, 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 and servicing is P3, 200 per month
(c) Labor including overtime and fringe benefits for one driver and one helper is P21, 000 per
month
(d) Annual taxes and insurance, 5% of first cost
(e) General maintenance per year is P40, 000
(f) Tires cost P32, 000 per set and will be renewed every 150 round trips.
What should the MGC Company do if a 15% interest rate on investment is included in the
analysis? Use ROR method.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps with 3 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education