Reference no: EM132786630

Questions -

Q1.Mr. Tino is thinking of buying a machine worthP300,000 with a scrap value of P40,000 after 5 years. It is expected to generate a net income before taxes of P80,000 a year with an income tax rate of 30%. The cost of capital is 10%.

A. What is the annual cash return?

B. What is the payback period?

C. What is the net present value?

Q2. BHI Holdings has been presented with an investment opportunity which has an annual cash inflow of P30,000 per year in years 1-2; P40,000 per year in years 3 to 4; and P60,000 in year 5. This investment cost the firm P120,000 today and the firm's required rate of return is 10%.

A. What is the payback period of this investment?

B. What is the discounted payback period?

C. What is the net present value of the investment?

Q3. Cayco Medical Center is considering purchasing an ultrasound machine for P950,000. The machine has a 10 - year life and an estimated salvage value of P55,000. Installation costs and freight charges will be P24,200 and P800, respectively. Newman uses straight-line depreciation.

The medical center estimates that the machine will be used five times a week with the average charges to the patient for ultrasound of P800. There are P10 in medical supplies and P40 of technician costs for each procedure performed using the machine. The present value of an annuity of 1 for 10 years at 9% is 6.418 while the present value of 1 for 10 years at 9% is 0.42241

A. The cash payback period is?

B. The project is expected to generate net present value of?

C. What is the accounting rate of return provided by the project?

D. What is the annual net income of this project?