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Compute the net investment in acquiring the new press

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Reference no: EM132970603

Problem 1: Liwanag Publishing Inc. considers replacing an old press that costs P800,000 six years ago with a new one that would cost P2,250,000. The firm is accorded a credit term of 3/15, n/45. Shipping and installation would cost additional P200,000. The old press has a book value of P150,000 and could be sold currently for P100,000. The new press would increase production leading to increase in inventories by P40,000, accounts receivable by P160,000 and accounts payable by P140,000. However, the new press enables the firm to avoid the immediate repairs cost of P30,000 on the old press. The firm is subject to 35% income tax rate. Compute the net investment in acquiring the new press.

Reference no: EM132970603

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