True or False_________ 1. Expansion Investment refers to investment on obsolete facilities._________ 2. Capital Budgeting referred to as planning and control of capital expenditure.__________3. Risk Involved refers to the uncertainty of an expected turn.__________4. The narrative section serves to identify the originator and the project of the proposal.__________ 5. Credit refers to the economic evaluation of a certain proposal.__________ 6. An investment is made when a firms spends some of its funds for the establishing of a project.__________ 7. Investments in safety and/or environmental project are sometimes called as non-revenue producing projects.__________8. Valuation is the process when the firms determined the real worth of the proposal.__________9. Repairs deals with the availability of spare parts and maintenance experts._________10. Investment worth deals with the social considerations and other non-economic persuasions and preferences.Solving: (20 points) Formula PVCI PVCO

A Sample Investment Proposal For the purchase of an equipmentAcquisition CostP 5,000,000Economic Life 5 yearsSalvage Value 50,000

Earning Cost Per YearIncome6,000,000Expense(2,000,000)Net Income before tax & depreciation4,000,000Less: Depreciation (Straight Line)1,000,000_Net Income before tax3,000,000Less: Income Tax 930,000Ave. Net Annual Earnings2,070,000Annual Cash Inflow: 3,070,0001. Solve using the Payback Method.2. Solve using the Average Return on Investment. 2.

1.

Solve for the Cash Inflows for the 5th year period if the Desired Rate of Return is 35%. And solve for the Net Present Value and make your decision.

Cash FlowFuture ValuePresent Value

Outflow Inflows

1st year

2nd year

3rd year

4th year

5th year

5th year (Salvage Value)

Total

Decision:

Net Present Value:

Page | 3