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  • ALTERNATIVES

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    Mary Grace Dangtayan
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    The document discusses capitalized cost problems involving machinery. It provides two examples where companies are considering machinery that costs a certain amount, has a salvage value after a set number of years, and a required minimum rate of return. For each example, readers are asked to calculate the annual investment cost and capitalized cost of the machinery using the provided financial details.

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    The document discusses capitalized cost problems involving machinery. It provides two examples where companies are considering machinery that costs a certain amount, has a salvage value after a set number of years, and a required minimum rate of return. For each example, readers are asked to calculate the annual investment cost and capitalized cost of the machinery using the provided financial details.

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    © All Rights Reserved
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    3 views14 pages

    ALTERNATIVES

    Uploaded by

    Mary Grace Dangtayan
    The document discusses capitalized cost problems involving machinery. It provides two examples where companies are considering machinery that costs a certain amount, has a salvage value after a set number of years, and a required minimum rate of return. For each example, readers are asked to calculate the annual investment cost and capitalized cost of the machinery using the provided financial details.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    of 14

    CAPITALIZED COST

    EXERCISE PROBLEMS
    1. The San Miguel Corporation is considering to manufacture a new
    product where an equipment costing P100,000 must be installed which
    will have a life of 8 years. Salvage value of the machine at the end of its
    expected life is P12000. If the minimum attractive rate of return is 12%
    per annum.
    a. Compute the annual investment cost.
    b. Compute the capitalized cost.
    EXERCISE PROBLEMS
    2. A construction company owns an earth moving machine that cost
    P200,000. After 8 years, it will have an estimated salvage value of P20,000.
    If money is worth 6% per anum.
    a. Compute the annual investment cost.
    b. Compute the capitalized cost.
    RATE OF RETURN
    ANNUAL WORTH METHOD

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