Answer: 224,000

CBN Corporation is considering an investment in new machinery and is gathering data about the proposed purchase. The new machine costs P500,000 and will have delivery charges of P45,000 and installation charges of P25,000. The new machine will be depreciated over 5 years and the salvage value will not be considered in the depreciation calculation. The old machinery had an original cost of P200,000. The current book value of the old machinery is 315,000 and has a current market value of P25,000. The new machine is expected to produce marginal cash revenues of P325.000 and marginal cash expenses of P75,000 annually for each of the next 5 years. The new machine will be sold at the end of the 5-year project for P30,000, when it will be fully depreciated. ABS is subject to a 25% tax rate. CBN Corporation has a weighted average cost of capital of 12%, but since this project is riskier than other projects, management has decided to adjust the required rate of return by 1%. Calculate the Net present value