1. A young engineer is considering establishing his own small company. An investment of Php 100,000 will be required which must be recovered in 15 years . It is estimated that sales will be Php 150,000 per year and that operating expenses will be as follows: Material Php 40,000 per year Labor Php 70,000 per year Overhead Php 10,000 + 10% of sales/year Selling expenses Php 5,000/year The young engineer will give up his regular job paying Php 150,000 per year and devote full time to the operation of the business. This will result in decreasing labor by Php 10,000 per year , material cost by Php 7000 per year, and overhead cost by Php 8000 per year. If the young engineer expects to earn at least 20% on his capital, should he invest ?
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- Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated revenue producing life of 4 years. Falkland has a cost of capital of 8%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?Your company is planning to purchase a new log splitter for is lawn and garden business. The new splitter has an initial investment of $180,000. It is expected to generate $25,000 of annual cash flows, provide incremental cash revenues of $150,000, and incur incremental cash expenses of $100,000 annually. What is the payback period and accounting rate of return (ARR)?Caduceus Company is considering the purchase of a new piece of factory equipment that will cost $565,000 and will generate $135,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return In Excel, see Appendix C.
- A restaurant is considering the purchase of new tables and chairs for their dining room with an initial investment cost of $515,000, and the restaurant expects an annual net cash flow of $103,000 per year. What is the payback period?A young mechanical engineer is considering establishing his own small company. An investment of ₱400,000 will be required, which will be recovered in 15 years. It is estimated that sales will be ₱800,000 per year and that operating expenses will be as follows: Materials ₱360,000 per yearLabor ₱280,000 per yearOverhead ₱40,000 + 10% of sales per yearSelling Expense ₱60,000 per year The man will give up his regular job paying ₱216,000 per year an devote full time to the operation of the business; this will result in decreasing labor cost by ₱40,000 per year, material cost by ₱28,000 per year and overhead cost by ₱32,000 per year. If the man expects to earn at least 20% of his capital, should he invest? Answer: The man should not invest.year, and overhead cost by Php 8000 per year. If the young engineer expects to earn at least 20% on his capital, should he invest ? 2. A company is considering two types of equipment for power plant. Type A will cost Php 200,000. , requires Php 32,000 per year for power, supplies and maintenance and Php 50,000. annually for labor. Type B will require an investment of Php 300,000 and require Php 24,000 annually for power, supplies and maintenance, but will cost only Php 32,000 per year for labor. Insurance and property taxes total 3% of first cost per year. Payroll taxes (salary tax)are 4% annually. Estimated life of each type of equipment is 10 years and capital is worth 15% before taxes. Which equipment should be purchased?
- 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 160,000 per yearLabor 280,000 per yearOverhead 40,000 + 10 % of sales per yearSelling Expenses 60,000 The man will give u his regular job paying P216,000 per year and 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?15. A young mechanical engineer is considering establishing his own small company. An investment of Php 100,000 will be required which will be recovered in 15 years. It is estimated that the sales will Php 150,000 per year and that operating expenses will be as follows: Materials Labor Overhead Selling expense Php 40,000 per year 70,000 per year 10,000 + 10% of sales per year 5,000 per year This man will give up his regular job paying Php 15,000 per year and devote full time to the operation of the business; this will result in decreasing labor cost by Php 10,000 per year, material cost Php 7,000 per year and overhead cost by 8,000 per year. If he expects to earn at least 20% of his capital, should you recommend him to invest? TERA young mechanical engineer is considering establishing his own small company. Aninvestment of P400,000 will be required which will be recovered in 15 years. It is estimatedthat sales will be P800,000 per year and that operating expenses will be as follows. (see attached photo) The man will give u his regular job paying P216,000 per year and 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?
- 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 P160,000 per year Labor P280,000 per year Overhead P40,000 +10% of sales per year Selling expense P60,000 The man will give you his regular job paying P216,000 per year and 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 using the ROR method and what is the ROR? a. ROR = 13.224% (not justified) b. ROR = 18.345 % (justified) %3D c. ROR = 23.564% (not justified) d. ROR = 23.564 % (justified)A piece of machinery is projected to provide an income of = 125, 000 - 5000dollars per year I (t) machine is expected to last 12 years. Determine the maximum price that can be paid for the machine when purchased new assuming you could receive 6% return on the money if you chose to invest the money instead of purchasing the equipment. with t in years. TheA young engineer is considering to built a 25unit apartment near a commercial center. Because of the location, the investment can guarantee a 90% occupancy rate. So then, the project can have an earnings of 20% annually. Other data are the following: Land P10M Building cost 14M Projected Useful life Cost of land after 20 years 20 years 38M Cost of Building after 20 years Rent/unit/month 3.8M 13,000.00 Maintenance/unit/year Property Taxes Building Insurance 2,200.00 2% 0.7% Is this a good investment? Apply the methods of economic studies.