Reference no: EM132603242

Rue Company is planning to purchase a new equipment costing P 500,000. Freight and installation costs are P 50,000. The new equipment will be purchased to replace an old unit that was acquired several years ago at a cost of P 300,000, for which an accumulated depreciation of P 270,000 has been recorded. The old unit will be sold for P 20,000. Other assets that are to be retired as a result of the acquisition of the new machine can be salvaged and sold for P 100,000. The gain on the retirement of these other assets is P 6,000, which will increase income taxes by P 1,800. If the new equipment is not purchased, extensive repairs on the old equipment will have to be made at an estimated cost of P 30,000. This repairs expense can be avoided by purchasing the equipment. Additional gross working capital of P 50,000 will be needed to support operations planned with the new equipment.

Question 1: What is the amount of investment for decision-making purposes