An industrial engineer of a textile company is evaluating alternatives for a new depot. His current...
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An industrial engineer of a textile company is evaluating alternatives for a new depot. His current warehouse is managed by a third-party company with a capital investment of P4,000,000 and an annual inventory cost of P470,000 until the end of the contract at year 10. On the other hand, if he desires to build his own depot, there are two alternatives that he is considering: Factor Alternative Initial Investment Annual Operational Cost Annual Maintenance Cost Salvage Value Useful Lives Depreciation Depot A 5,500,000 150,000 65,000 in year 3 and increasing by 40,000/year thereafter 1,250,000 10 Depot B 5,000,000 150,000 400,000 2,500,000 12 Straight Line Declining Balance If the hurdle rate is 12% per year and the analysis period is 10 years, what option should he choose? Use the PW method. (25 pts) An industrial engineer of a textile company is evaluating alternatives for a new depot. His current warehouse is managed by a third-party company with a capital investment of P4,000,000 and an annual inventory cost of P470,000 until the end of the contract at year 10. On the other hand, if he desires to build his own depot, there are two alternatives that he is considering: Factor Alternative Initial Investment Annual Operational Cost Annual Maintenance Cost Salvage Value Useful Lives Depreciation Depot A 5,500,000 150,000 65,000 in year 3 and increasing by 40,000/year thereafter 1,250,000 10 Depot B 5,000,000 150,000 400,000 2,500,000 12 Straight Line Declining Balance If the hurdle rate is 12% per year and the analysis period is 10 years, what option should he choose? Use the PW method. (25 pts)
Expert Answer:
Answer rating: 100% (QA)
Depreciation for DepotB is Calculated as Below Rate1Total Nof Useful life112100833 DepotA Partculars ... View the full answer
Related Book For
Accounting What the Numbers Mean
ISBN: 978-1260565492
12th edition
Authors: David Marshall, Wayne McManus, Daniel Viele
Posted Date:
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