1. Ravel Companyis considering an equipment upgrade. Ravel uses discounted cash flow analysis in evaluating capital investments and has an effective tax rate of 30%. Selected data developed by Ravel are shown below:

Existing equipment New equipment Original cost P50,000 P95,000 Accumulated depreciation 45,000 0 Current market value 7,000 95,000 Accounts receivable 6,000 8,000 Accounts payable 2,100 2,500