1. A young mechanical engineer is considering establishing his own small company. An investment of P400,000 will be required, which will be recovered in 15 years. It is estimated that sales will be P800,000 per year and that operating expenses will be as follows: Materials P360,000 per year Labor P280,000 per year Overhead P40,000 + 10% of sales per year Selling Expense P60,000 per year The man will give up his regular jod paying P216,000 per year an devote full time to the operation of the business; this will result in decreasing labor cost by P40,000 per year, material cost by P28,000 per year and overhead cost by P32,000 per year. If the man expects to earn at least 20% of his capital, should he invest? 2. A food processing plant consumed 600,000 kwh of electric energy annually and pays an average of P2.00 per kwh. A study is being made to generate its own power to supply the plant the energy required, and that the power plant installed would cost P2,000,000. Annual operation and maintenance, P800,000. Other expenses, P100,000 per year. Life of power plant is 15 years; salvage value at the end of life is P200,000; annual taxes and insurance, 6% of first cost; and rate of interest is 15%. Using the sinking fund method for depreciation, determine if the power plant is justifiable? 3. A fixed capital investment of P10,000,000 is required for a proposed manufacturing plant and an estimated working capital of P2,000,000. Annual depreciation is estimated to be 10% of the fixed capital investment. Determine the rate of return on the total investment and the payout period if the annual profit is P2,500,000