Determine annual cash inflow or annual cash return

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Reference no: EM132837252

Little Mermaid Company is planning to buy a new machine that can produce additional 20,000 units of product per year. The product sells for P50 each. The cost associated with the product is P30 per unit, exclusive of depreciation on the new machine. The new machine which is expected to last for 10 years will cost P500,000. No salvage value is expected to be recovered at the end of its life. The income tax rate is 32%.

REQUIRED:

Problem a. The accounting rate of return

Problem b. The annual cash inflow or annual cash return

Problem c. The accounting Net Income

Reference no: EM132837252

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