Question

1. THE PRIMARY OBJECTIVE OF ANY FIRMS IS TO MAKE PROFITS. EVERY BUSINESS ACTIVITY SHOULD ALWAYS BE DIRECTED TOWARDS THIS END. CAPITAL INVESTMENTS ARE NOT EXEMPTED FROM THIS REQUIREMENT. THEREFORE, A REQUIREMENT THAT INVESTMENT PROPOSALS SHOULD BE ANALYZED AND A DETERMINATION OF THEIR ECONOMIC VALUE TO THE FIRM SHOULD BE MADE. THERE ARE METHODS TO EVALUATE INVESTMENT PROPOSALS: 1.1. PAYBACK 1.2. RATE OF RETURN 1.3. DISCOUNTED CASH FLOW INVESTMENT PROPOSAL TO PURCHASE A MACHINE ACQUISITIO COST P10,000,000.00 ECONOMIC LIFE 10 YRS. SALVAGE VALUE 100,000.00 EARNINGS AND COST/YR INCOME 5,000,000.00 EXPENSES 2,000,000.00 NET INCOME BEFORE TAX AND 3,000,000.00 DEPRECIATION LESS: DEPRECIATION (STRAIGHT METHOD) 1,000,000.00 NET INCOME BEFORE TAX 2,000,000.00 LESS: INCOME TAX. 620,000.00 AVERAGE NET ANNUAL EARNINGS 1,320,000.00 CASH INFLOW00,00000,000S PER YEAR= NET EARNINGS+DEPRECIATION=p2,380,000.00 1.4. EVALUATE AND DETERMINE IF THE PROPOSAL IS FEASIBLE BY APPLYING THE ABOVE MEHTODS.

Answer 1

DATE: DATE: PAYBACK PERIOD : - EVALUATION UNDER Add Average Net ANNUAL Eaoninge (given) Depoication. 2010 Net Annual Cash flows 1,320,000 Loog,000 2330000 Pay back period - Initial investment net Annual Cashtious OD 10,000,000 2,380,000 _ = 4.20y ears Decasion - The period in which we get the invested amount back is called Payback Period since 4:30years is less than. the desired period cloux) Project should QA Shot on Oneplus accepted. Powered by Dual Camera Paseo Return ! -

DATE: DATE: PAYBACK PERIOD : - EVALUATION UNDER Add Average Net ANNUAL Eaoninge (given) Depoication. 2010 Net Annual Cash flows 1,320,000 Loog,000 2330000 Pay back period - Initial investment net Annual Cashtious OD 10,000,000 2,380,000 _ = 4.20y ears Decasion - The period in which we get the invested amount back is called Payback Period since 4:30years is less than. the desired period cloux) Project should QA Shot on Oneplus accepted. Powered by Dual Camera Paseo Return ! -

DATE: DATE: PAYBACK PERIOD : - EVALUATION UNDER Add Average Net ANNUAL Eaoninge (given) Depoication. 2010 Net Annual Cash flows 1,320,000 Loog,000 2330000 Pay back period - Initial investment net Annual Cashtious OD 10,000,000 2,380,000 _ = 4.20y ears Decasion - The period in which we get the invested amount back is called Payback Period since 4:30years is less than. the desired period cloux) Project should QA Shot on Oneplus accepted. Powered by Dual Camera Paseo Return ! -

By Rate of Retorno Average annual income after tax & depreciation sounun ton apo xlo Average investment - Initiao eo on Scrap Invatment investment valio Average 10, arg, ar + 100, an ..2009 dop ou 5osao odr Rate of = 1,380, ao x100 Return nou 50, savo KUD 2738% 27:326% Decesi'on-In case of one Pooject. After computing Rate of Return we have to compare with minimum rate prescribed by the Top management for the Accept ance on the Project DA Shot on OnePlus Powered by Dual Camera

PAGE NO. DATE: By Discounted cashylous ! net Arual cas bliews P 2,380,000 Present value of cashflowe @ @ 10 % Pu factors 6.1445 for 10 year Poogenu y qдио РІЧ623 9 10 Tess PV of cash outflow Plecom, ar 24623910 since Net Present value is positive 1 Project should be accepted. Shot on OnePlus Powered by Dual Camera