A special effects process can be carried out by using a machine which can be acquired for Php450,000. The sources for these funds are as follows:
|
Source
|
Amount
|
Cost
|
|
Short Term Stocks
|
Php 270,000
|
0.15
|
|
Common Stocks
|
Php 90,000
|
0.20
|
|
Marketable Securities
|
Php 90,000
|
0.05
|
Other data of the investment are as follows:
Life = 10 years
Value at end-of-life: Php 50,000
Annual Receipts = Php 150,000
Annual Disbursements = Php 60,000
Reinvestment Rate of Return = 13%
Is the investment justified? Use the following methods in testing its acceptability:
a. PW/NPV
b. AW
c. FW
d. IRR
e. ERR
f. ERRR
g. Simple payback when desired payback period is 4.5 years
h. Discounted payback