BW Company has determined that it requires a new treatment facility that would clean polluted water waste from its production facilities. The Cabalo water treatment facility has an estimated useful life of 10 years and can purify that water by dispelling about a million gallons of toxic substances per year.
Consider the other data below:
Revenue Expenditures
Salaries
P300,000
Plant facility supplies
240,000
Interest Expense (6% of plant costs
216,000
Repairs and Maintenance (5% of plant costs)
180,000
Depreciation Expense
500,000
Capital Expenditures
Plant Facilities
P3,600,000
Construction Costs
1,000,000
Overhead
400,000
The company is considering an alternative proposal of creating for another plant facility – Gomez water treatment facility. Gomez plant can be acquired at a costs of P4,000,000. The Gomez facility proposed that 25% reduction in the plant facility supplies costs and salaries.
Task:
Present a narrative recommendation as to which facilities should be constructed or acquired. Support your recommendation with supporting computations presenting your analysis.
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