worthwhile to invest in the insulation? What is the payback period of the investment?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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It is estimated that insulation of steam pipes in a factory will reduce the fuel bill by as much as 20%. The cost of the insulation is P120,000, and the annual cost of taxes and insurance is 5% of the initial cost. Without the insulation, the annual fuel bill is P190,000. If the insulation is worthless after 6 years, and a minimum return is 12% , would it be worthwhile to invest in the insulation? What is the payback period of the investment?

 

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