Reference no: EM133089653

Questions -

Q1. Assumption Corporation is considering replacing an obsolete machine with a new machine. The new machine would cost P250,000 and would have a ten-year useful life. The new machine would cost P12,000 per year to operate and maintain, but would save P55,000 per year in labor and other costs. The old machine can be sold now for P10,000. What the simple rate of return on the new machine?

a. 17.9%

b. 7.5%

c. 22.0%

d. 7.2%

Q2. Enerlam Company purchased a machine with an estimated useful life of seven years. The machine will generate cash inflows of P9,000 each year over the next seven years. If the machine has no salvage value at the end of seven years, and assuming the company's discount rate is 10%, what is the purchase price of the machine if the net present value of the investment is P17,000?

a. P43,812

b. P26,812

c. P17,000

d. P22,195