An investment of P270,000 can be made in a project that will produce a uniform annual...

 

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An investment of P270,000 can be made in a project that will produce a uniform annual revenue of P185,400 for 5 years and then have a salvage value of 10% of the investment. Out- of pocket costs for operation and maintenance will be P81,000 per year. Taxes and insurance will be 4% of the first cost per year. The company expects capital to earn not less than 25% before income taxes. What is the rate of return (ROR) of the project? a. 22.4% b. 23.7% c. 25.9% d. 24.5% An investment of P270,000 can be made in a project that will produce a uniform annual revenue of P185,400 for 5 years and then have a salvage value of 10% of the investment. Out- of pocket costs for operation and maintenance will be P81,000 per year. Taxes and insurance will be 4% of the first cost per year. The company expects capital to earn not less than 25% before income taxes. What is the rate of return (ROR) of the project? a. 22.4% b. 23.7% c. 25.9% d. 24.5%

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Solution Answer Option c is ... View the full answer