At present, a foundation who has 6 million deposit in bank with interest of 10% compounded annually,is planning to build a project that will last for a long period of time. The project will require an initial costof P8.5 million four years from now, annual maintenance would be P200,000 for the first 5 years andwill increase by P10,000 every year for the next 10 years and then the maintenance will be P300,000per year for the rest of its life. Major repair is estimated to be P1.5 million every 8 years to start 10years after construction. Determine the amount to be deposited at the end of each year for five years,starting three years from now, to sustain the cost of the project. .

As we can see that the cost part comes only within the 4th year and we only have 5 years once the…

Answered: a project that will last for a long…

a project that will last for a long period of time. years from now, annual maintenance would b 0,000 every year for the next 10 years and the

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 19EA: Redbird Company is considering a project with an initial investment of $265,000 in new equipment...

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

At present, a foundation who has 6 million deposit in bank with interest of 10% compounded annually,
is planning to build a project that will last for a long period of time. The project will require an initial cost
of P8.5 million four years from now, annual maintenance would be P200,000 for the first 5 years and
will increase by P10,000 every year for the next 10 years and then the maintenance will be P300,000
per year for the rest of its life. Major repair is estimated to be P1.5 million every 8 years to start 10
years after construction. Determine the amount to be deposited at the end of each year for five years,
starting three years from now, to sustain the cost of the project. .

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