Moon Company uses a 10% discount rate and the total cost approach to capital budgeting analysis.

Both alternatives are Akda Investments which has a marginal cost of capital of 12 percent is evaluating
two mutually exclusive projects (X and Y), which have the following projections:

PROJECT X PROJECT Y

Investment P48,000 P83,225

After-tax cash inflow 12,000 15,200

Asset life 6 years 10 years

The indifference point for the two projects is

A. 12.64% C. 12.00%

B. 16.01% D. 19.33%

Questions 1 through 4 will be based on the following data:

The management of Arleen Corporation is considering the purchase of a new machine costing P400,000.
The company’s desired rate of return is 10%. The present value of P1 at compound interest of 10% for 1
through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively, and the present value of annuity
of 1 for 5 periods at 10 percent is 3.79. In addition to the foregoing information, use the following data
in determining the acceptability in this situation:

Year Income from Operations Net Cash Flow

1 P100,000 P180,000

2 40,000 120,000

3 20,000 100,000

4 10,000 90,000

5 10,000 90,000

. The average rate of return for this investment is:

A. 18 percent C. 58 percent

B. 6 percent D. 10 percent