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Hiraya Manawari Corporation plans to acquire an equipment costing PHP 600,000.00. Depreciation on the new equipment would be PHP 120,000.00 each year for 5 years.

Hiraya Manawari Corporation plans to acquire an equipment costing PHP 600,000.00. Depreciation on the new equipment would be PHP 120,000.00 each year for 5 years. The annual cash flow before income tax from this equipment has been estimated at PHP 220,000.00. The tax rate is 25%.

  1. Find the accounting rate of return.
  2. Find the net present value if the minimum acceptable rate of return on investment is 15%.

Estimate the economic rate of return

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