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Juan Dela Cruz is considering establishing a company to produce impellers for water pumps. An investment of P5,000,000 will be required for the plant and
Juan Dela Cruz is considering establishing a company to produce impellers for water pumps. An investment of P5,000,000 will be required for the plant and equipment, and P750,000 will be required for working capital. It is expected that the property will last for 15 years, at which time only working capital part of the investment can be recovered. It is estimated that sales will be P10,000,000 per year and that the operating expenses will be as follows: Materials Labor Overhead Selling expenses P2,000,000 3,500,000 500,000 + 10% of sales per year 250,000 per year Juan has a regular paying job of P2,000,000 per year, but he will keep the job even if he establishes this company. If Joe expects to earn at least 15% of this capital, should this investment be made? Use Annual Worth, Present Worth and Future Worth method
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