Chandler Corporation is planning to invest P420,000 in a new machine which it will depreciate on a straight-line basis over 10 years with zero salvage value. The new machine is expected to generate cash flows from operations, net of income taxes, of P50,000 per year in each of the first six years and P60,000 per year in each of the last four years of its life. What is the payback period?
1. Chandler Corporation is planning to invest P420,000 in a new machine which it will depreciate on a straight-line basis over 10 years with zero salvage value. The new machine is expected to generate cash flows from operations, net of income taxes, of P50,000 per year in each of the first six years and P60,000 per year in each of the last four years of its life.
What is the payback period?
2.
Joey Corporation is considering the purchase of a new machine costing P450,000. The machine will have an economic life of 5 years with no salvage value at the end of its useful life. It will be depreciated using the straight-line method and is expected to produce annual cash flows from operations of P150,000. Joey’s cost of capital is 10%.
What is the present value of this capital investment project? Use the Excel formula to compute
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