How many years can super ping recover the initial cost

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Question - Super Ping, a domestic shipping line, has recently commissioned a new passenger ship, the SP-20. The new ship can carry up to 2,000 passengers. It was purchased by Super Ping at a cost of P300 million. Its estimated service life is 10 years, with salvage value P40 million at the end of its service life. SP-20 is expected to have 300 voyage-days per year with an average of 80% occupancy rate. The revenue from each passenger is estimated at P250 per day, while daily variables costs per passenger is P100. Annual fixed cost of operating the ship, exclusive of depreciation, is estimated at P20 million per year. Super Ping pays tax at a rate of 32% of income tax. In how many years can Super Ping recover the initial cost of investment in SP-20?

a. 5.95 years

b. 4.17 years

c. 6.87 years

d. 10 years

Reference no: EM133118134

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