Bellrome Company is planning to replace an old machine with the following related information: Book value P300,000 Remaining useful life 5 years Current market value 150,000 Additional information: The replacement machine can be acquired at a list price of P500,000. A 5% cash discount is available if the said machine is paid within 30 days from acquisition date. Freight and installation costs is estimated at P75,000. Should the company decide not to acquire the new machine, it needs to repair the old one at a cost of P50,000. Otherwise, additional cost of removing the old unit is estimated at P10,000. Additional gross working capital of P15,000 will be needed to support operation planned with the new equipment. The new machine is estimated to reduce cash operating costs amounting to P150,000 per year and is to be depreciated using the straight-line method over its useful life of 5 years. Bellrome is subject to a 30% income tax rate. REQUIREMENTS: a. What is the net initial cost of investment to be used in decision making? b. What is the increase in annual net income? c. What is the increase in annual net cash flows if the company replaces the machine?