Homework answers / question archive / Net cost of investment, The City Lending Company plans to open a new branch office wherein the company shall invest P500,000 in furnishings and equipmen

Net cost of investment, The City Lending Company plans to open a new branch office wherein the company shall invest P500,000 in furnishings and equipmen

Accounting

Share With

Net cost of investment, The City Lending Company plans to open a new branch office wherein the company shall invest P500,000 in furnishings and equipmen. Another P200,000 shall be used for rental deposits to the lessor. Sales from this new branch are
estimated at P9,000,000 a year. One-third of these sales will be in the form of accounts receivable at any given time. Cost of goods sold are estimated to be two-thirds of sales. The investment in merchandise inventory will amount to approximately P400,000 at any time during the year. Cash of P120,000 will be needed to meet payments for operating expenses. Required: Compute the total amount to be invested in the new branch for decision-making purposes. 5. Net returns. The New Dimensions Corporation is planning to add a new product line to its present business. The new product will require a new equipment costing P1,200,000, having a five-year useful life with no salvage value. The following estimates are made available: Annual sales P6,000,000 Annual costs and expenses: Materials 800.000 1,200,000 Labor Factory overhead (excluding depreciation 540,000 on new equipment) Selling and administrative expenses 700.000 Income tax rate, 30%. Required: 1. Annual income after tax. 2. Annual net cash flow after tax. intion wishes to compute a weighted average cost of