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Compute the present value factors

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Reference no: EM133008555

Question - The Zoom Corporation is a famous restaurant in Quezon City.  Management is considering the purchase of a machine that would mix all ingredients and cook the dish to the restaurant's rigid specifications.

The machine will function for an estimated twelve (12) years, and the purchase price including installation is P1,860,000.

Estimated salvage value is 60,000.

This labor saving device is expected to increase cash flows by an average of P300,000 per year during its life.

Assume that the company uses a straight line method of depreciation, a 30% tax rate and an after tax minimum desired rate of return of 7%.

Using the present value method, determine whether the company should purchase the machine. Compute the present value factors.

Reference no: EM133008555

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