What is the net investment on the new equipment

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President Snow uses a labor-intensive manufacturing process. Existing equipment has a book value of P 20,000, a five-year remaining life, and a P 12,000 market value. Annual depreciation is P 4,000 and cash operating costs is P 64,000. The proposed process requires machinery costing P 100000 with a useful life of five years and no salvage value. The new machinery, which will replace the old one, requires P 40,000 in annual cash costs. Straight-line depreciation will be used for tax purposes for the new machine. The tax rate is 30% and the cost of capital is 12%.

Question 1: What is the net investment on the new equipment?

Question 2: What is the annual net cash inflow from the new equipment?

Reference no: EM132603250

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