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Find the required increase in annual cash inflows

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Reference no: EM133034385

Question - The following data pertain to Sunlight Corp., whose management is planning to purchase an automated tanning equipment:

Economic life of the equipment 8 years.

Disposal value after 8 years 0

Estimated net annual cash inflows for each of the 8 years P81,000

Time-adjusted internal rate of return 14%

Cost of Capital of Sunlight Corporation 16%

Annual depreciation P46,970

PVAIF for 8 years, 14% 4.639

PVAIF for 8 years, 16% 4.344

Find the required increase in annual cash inflows in order to have the time adjusted rate of return approximately equal to the cost of capital.

a. P5,500

b. P6,500

c. P4,344

d. P5,871

Reference no: EM133034385

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