A company is considering constructing a plant to manufacture a proposed new product. The land costs 300,000.00, the building costs 600,000.00, the equipment costs 250,000.00 and 100,000.00 additional...


A company is considering constructing a plant to manufacture a proposed new product. The land costs 300,000.00, the building costs<br>600,000.00, the equipment costs 250,000.00 and 100,000.00 additional working capital is required. It is expected that the product will result in<br>sales of P750,000 per year for 10 years, at which time the land can be sold for 400,000.00, the building for 350,000.00 and the equipment for<br>50,000.00. All of the working capital would be recovered at the end of year 10. The annual expenses for labor, materials, and all other items are<br>estimated to total 475,000.00. If the company requires a MARR of 15% per year on projects of comparable risk, determine if it should invest in<br>the new product line. Evaluate using all methods.<br>a.) Rate of Return<br>Please answer in this format.<br>Given:<br>Formula (Please use this formula):<br>net annual profit<br>Rate of return<br>capita invested<br>Note: If there is a required value before using the given formula, then solve for it to be able to use the given formula.<br>Solution:<br>b.) Annual Worth Method<br>Please answer in this format.<br>Given:<br>Formula (Please use this formula): MARR stands for Minimum Attractive Rate of Return<br>In this method, the minimum required profit (MRP) is included as a cost or expenses. This<br>computed as:<br>MRP = Initiallnvest x MARR<br>Then excess is computed as:<br>Excess 3D Incоте - Еxpenses<br>Note: If there is a required value before using the given formula, then solve for it to be able to use the given formula.<br>Solution:<br>

Extracted text: A company is considering constructing a plant to manufacture a proposed new product. The land costs 300,000.00, the building costs 600,000.00, the equipment costs 250,000.00 and 100,000.00 additional working capital is required. It is expected that the product will result in sales of P750,000 per year for 10 years, at which time the land can be sold for 400,000.00, the building for 350,000.00 and the equipment for 50,000.00. All of the working capital would be recovered at the end of year 10. The annual expenses for labor, materials, and all other items are estimated to total 475,000.00. If the company requires a MARR of 15% per year on projects of comparable risk, determine if it should invest in the new product line. Evaluate using all methods. a.) Rate of Return Please answer in this format. Given: Formula (Please use this formula): net annual profit Rate of return capita invested Note: If there is a required value before using the given formula, then solve for it to be able to use the given formula. Solution: b.) Annual Worth Method Please answer in this format. Given: Formula (Please use this formula): MARR stands for Minimum Attractive Rate of Return In this method, the minimum required profit (MRP) is included as a cost or expenses. This computed as: MRP = Initiallnvest x MARR Then excess is computed as: Excess 3D Incоте - Еxpenses Note: If there is a required value before using the given formula, then solve for it to be able to use the given formula. Solution:
Jun 05, 2022
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