A young engineer is considering establishing his own small company. An investment of P400,000 will be required which will be recovered in 15 years. It is estimated that sales will be P800,000 per year and that operating expenses will be as follows. 1. Materials Labor Overhead Selling expense P160,000 per year P280,000 per year P40,000 + 10% of sales per year P60,000 The man will give u his regular job paying P216,000 per year and devote full time to the operation of the business; this will result in decreasing labor cost by P40,000 per year, material cost by P28,000 per year and overhead cost by P32,000 per year. If the man expects to earn at least 20% of his capital, should he invest?

ENGR.ECONOMIC ANALYSIS
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1. A young engineer is considering establishing his own small company. An investment of P400,000 will be required which will be
recovered in 15 years. It is estimated that sales will be P800,000 per year and that operating expenses will be as follows.
Materials
Labor
Overhead
Selling expense
P160,000 per year
P280,000 per year
P40,000 +10% of sales per year
P60,000
The man will give u his regular job paying P216,000 per year and devote full time to the operation of the business; this will
result in decreasing labor cost by P40,000 per year, material cost by P28,000 per year and overhead cost by P32,000 per year. If the
man expects to earn at least 20% of his capital, should he invest?
Transcribed Image Text:1. A young engineer is considering establishing his own small company. An investment of P400,000 will be required which will be recovered in 15 years. It is estimated that sales will be P800,000 per year and that operating expenses will be as follows. Materials Labor Overhead Selling expense P160,000 per year P280,000 per year P40,000 +10% of sales per year P60,000 The man will give u his regular job paying P216,000 per year and devote full time to the operation of the business; this will result in decreasing labor cost by P40,000 per year, material cost by P28,000 per year and overhead cost by P32,000 per year. If the man expects to earn at least 20% of his capital, should he invest?
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