5. A project is estimated to cost P100, 000, last 8 years and have a P10, 000 salvage value. The annual gross income is expected to average P24, 000 and annual expenses, excluding depreciation, will total P6,000. If capital is earning 10% before income taxes. Determine if this is a desirable investment using the annual cost method.

5. A project is estimated to cost P100, 000, last 8 years and have a P10, 000 salvage value. The annual gross income is expected to average P24, 000 and annual expenses, excluding depreciation, will total P6,000. If capital is earning 10% before income taxes. Determine if this is a desirable investment using the annual cost method.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 1BE: Average rate of return Determine the average rate of return for a project that is estimated to yield...

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A PROJECT IS ESTIMATED TO COST P 100,000.00, LASTS 8 YEARS, AND HAVE A P 10,000.00 SALVAGE VALUE. THEANNUAL GROSS INCOME IS EXPECTED TO AVERAGE P 24,000.00 AND ANNUAL EXPENSES, EXCLUDINGDEPRECIATION, WILL TOTAL P 6,000.00. IF CAPITAL IS EARNING 10% BEFORE INCOME TAXES, DETERMINE IFTHIS IS A DESIRABLE INVESTMENT USING:A.) RATE-OF-RETURN METHODB.) ANNUAL COST METHODC.) PRESENT-WORTH COST METHOD
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A project is estimated to cost P120T, last 8 years & have a salvage value of P20T. The annual gross income is expected to average P50k & annual expenses is P5T. If capital is earning 10% determine if this is a desirable investment using annual cost method, what is the net cost. : a. 24,255.598 b. P24,756.951 c. 25,245.598 d. P27,535.412
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