Question

Please answer 3. with a clear solution. if you are willing to solve the 4. its okay. so i can have idea if my answer is correct. My final aswer is BV=207500

3. As an investment which he intends to keep for 10 years, a man bought a lot for P15,000 cash. He wants a 12% after tax rate of return over and above the 8% inflation rate. If capital gains tax is 16% of his profit upon selling the lot, at what price must he sell the lot at the end of 10 years.

4. You are planning to sell your small manufacturing plant originally costing P250,000 when it was put up 15 years ago. Some equipment originally costing P10,000 was replaced 10 years ago with new equipment costing P15,000. The equipment installed 10 years ago has now depreciated by P7,500. The depreciation of the remaining portion of the plant originally installed 15 years ago is now P40,000. Determine the present book value of the plant.

Answer 1

3.

given:

man bought lot at the price of = 15000

inflation rate 8% (15000) = 1200

he wants 12% after tax returns = 1400 x 10 years = 14000

he sells at 16% profit at the end of 10 years .

solution

calculation of lot selling at the end of 10 years = actual price of the lot + infaltion rate + amount of profit sell at the end of 10 years 16%

= 15000+1200(8% of 15000) + 16 % of profit

= 16200+ 2592(16% of 16200)

= 18792.

4.

plant purchased 15years ago = 250000

equipment replaced 10 years ago = 15000

depreciation for the equipment replaced 10 years ago = 7500

rest of plant equipments depreciation costing = 40000

calculation of current plant value after 15 years = plant purchased value + replacement difference (15000-10000) - depreciation for the equipment replaced 10 years ago - rest of the plant equipment depreciation .

= 250000+5000-7500-40000 = 207500