1. A new machine cost P500, 000 and will produce net cash inflows of P150, 000 per annum for eight years, starting at time 3. The machine will be located in an old building which cost P1m six years ago. The building could now be sold for P2m or P4 m at the end of the project.

In addition to the costs above, the use of the manufacturing process the company will have to pay a royalty of P 1,000 per annum for 100 years , starting now for the use of the patent.

Using the NPV method and discount rate 12% appraise the project.