The engineer of a medium scale industry was instructed to prepare at least two plans which isto be considered by management for the improvement of their operations. Plan "A" calls for aninitial investment of P200,000 now with a prospective salvage value of 20% of the first cost 20years hence. The operation and maintenance disbursement are estimated to be P15,000 a yearand taxes will be 2% of first cost.Plan "B" calls for an immediate investment of P140,000 and a second investment of 160,000eight years later. the operation and maintenance disbursements will be P9,000 a year for initialinstallation and P8,000 a year for the second installation. At the end of 20 years the salvagevalue shall be 20% of the investments. Taxes will be 2% of the first cost.If money is worth 12%, which plan would you recommend? Solve using present worth costmethod and equivalent uniform annual cost method.

A B 0-7 8 COST 200000 COST 140000 160000…

Answered: -which plan would you recommend?

Business

Finance

-which plan would you recommend?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter11: Capital Budgeting And Risk

Section: Chapter Questions

Problem 15P

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