1.The following are information of an investment proposal for the purchase of a machine:

Acquisition costP 10, 000,000

Economic Life10 years

Salvage value100,000

Earnings and cost per year

Income5,000,000

Expenses-2,000,000

Net Income before tax and depreciation3,000,000

Less: Depreciation (Straight Line)990,000

Net Income before tax2,010,000

Less: Income Tax620,000

Average Net Annual Earnings1,390,000

Cash InflowsPer Year = Net Earnings + Depreciation = P 2,380,000

1,390,000+ 990,000

Additional data: If the desired rate of return is 25%, the cash inflows for the ten-year period maybe computed to determine the present value for each year.

Cash FlowFuture Value Present Value

Out Flow-P10,000,000

Inflows

1^styearP 2,380,000P1,904,000

2^ndyear2,380,000_________

3^rd year2,380,000_________

4^th year 2,380,000_________

5^th year2,380,000_________

6^th year2,380,000_________

7^th year2,380,000_________

8^th year2,380,000_________

9^th year2,380,000_________

10^th year2,380,000_________

10^th year (salvage value)100,000 _________

TOTALP23,900,000_________

Requirement:

a.Complete the data on the table.

b.Find the net present value.

c.Interpret the result of your computation .

d.What will be your decision on this investment proposal?