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Questions 9 to 14 are based on the following Lakewood Company is considering the purchase of a special-purpose bottling machine for P280,000. It is expected to have a useful life of 7 years with a zero terminal disposal price. The plant manager estimates the following savings in cash-operating costs: Year Annual Cash Savings 1 140,000 2 110,000 3 80,000 4 60,000 5 40,000 6 30,000 7 30,000 Lakewood uses a required rate of return of 12% in its capital budgeting decisions. Incremental tax rate is 40%. The company uses straight line depreciation. The present value of an annuity of 1, at 12% for y years is 4.56376. The details of the present value at 12% in seven years are: Year Annual cash savings 1 0.89286 2 0.79719 3 0.71178 4 0.63552 5 0.56743 6 0.50663 7 0.45235 9 The number of years to recover the amount of investment is: a. 4.83 years b. 3.65 years c. 2.38 years d. 4.0 years 10. What is the amount of after-tax cash flow in year 7? a. P30,000 b. 34,000 c. 36,400 d. 22,000

11. What is the net present value for the investment?

12. What is the accounting rate of return based on initial investment? a. 6.43% b. 12.86% c. 20.71% d. 41.42% 13. What is the discounted payback period?

14. Compute for Profitability index.

NOTE: Need answer before 12:35 pm. Thank you!

JOUT A Questions 9 to 14 are based on the following Lakewood Company is considering the purchase of a special-purpose bottling machine for P280,000. It is expected to have a useful life of 7 years with a zero terminal disposal price. The plant manager estimates the following savings in cash-operating costs: Year Arual Cash Savings 1 140,000 2 110,000 3 80,000 4 60,000 5 40,000 6 30,000 7 30,000 Lakewood uses a required rate of return of 12% in its capital budgeting decisions Incremental tax rate is 40% The company uses straight line depreciation. The present value of an amuty of 1. at 12% for y years is 4.56376 The details of the present value at 12% in seven years are: Annual cash savings 1 0.89286 2 0.79719 3 0.71178 4 0.63552 0.56743 0.50663 0.45235 9 The number of years to recover the amount of investment is: a 4.83 years b. 3.65 years c. 2,38 years d. 4.0 years 10. What is the amount of after-tax cash flow in year 7? a P30,000 b. 34,000 C. 36,400 d. 22.000 Year OUT OWN 11 What is the net present value for the investment? 12 What is the accounting rate of return based on initial investment? 6.43% b. 12.86% C 20.71% d. 41.42% a. 13 What is the discounted payback period? Compute for Profitability index 14

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