A company is deciding whether to purchase new equipment that costs P5,000,000. Management estimates the life of the new asset to be five years and expects it to generate additional annual profits of P2M on year1, P1.5M on year 2 & 3, P1M on year 4 & 5. In the sixth year, the company plans to sell the equipment for its salvage value of P500,000. Another similar investment can generate a 12% return. This is higher than the company's current hurdle rate of 10%.

a. Compute the net present value of cash flows

b. Compute the Internal Rate of Return (IRR)

c. What is your recommendation to the company for this project?