A fixed capital investment of P10,000,000 is required for a proposed manufacturing plant and an estimated...

A fixed capital investment of P10,000,000 is required for a proposed manufacturing plant and an estimated working capital of P2,000,000. Annual depreciation is estimated to be 10% of the fixed capital investment. Determine the rate of return on the total investment if the annual profit is P2,500,000. Determine the payout period if the annual profit is P2,500,000

Expert Solution


Fixed investment	10,000,000
Depreciation	10%
Depreciation per annum	1,000,000

Annual profit	2,500,000
Add: depreciation	1,000,000
Cash profit per annum	3,500,000

Return on invetment	Annual profit
	(fixed capital + working capital)

	25,00,000/ (10,00,00,00 + 2,000,000)
	20.83%

Payback period	Total capital employed
	Annual cash flow profit

	10,000,000 + 2,000,000)/ 35,00,000/
	3.43	Years

ekkarill92 answered 1 year ago

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