Question
1. The following data are given for JBL Corp: Initial cost of proposed equipment is P75,000; Estimated useful life is 7 years; Estimated useful life
1. The following data are given for JBL Corp: Initial cost of proposed equipment is P75,000; Estimated useful life is 7 years; Estimated useful life is 7 years; Estimated annual savings in cash operating expenses is P18,000; scrap value is P3,000 and cost of capital is 12%. Management would like you to advice them on whether to accept or reject the project, using the following capital budgeting techniques solve for: a) Payback Period b) Accounting Rate of Return c)Net Present Value and d) Internal Rate of Return.
2. Hydro Corporation has provided you with the following revenue and cost information: Building and equipment cost is $490,000; Annual income is $520,000 and Annual Cash operating costs is $380,000. Useful life of these fixed assets is 20 years. Should the company incest in these fixed assets? Explain to management by presenting to them the payback period and accounting rate of return techniques.
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