Capital budgeting

NPV Company is considering to buy a new machine which cost

P50,000. It will be a labor saving investment which will reduce payroll

by P13,500 per year. Its useful life is 8 years and it will have zero

salvage value. A minimum desired rate of return of 18% is used for

capital investment decisions. Information on present value factors is as

follows:

PresentvalueofP1for8periodsat18%.266

PresentvalueofanannuityofP1for8periods4.078

Would the machine be acquired? Support your answer with a solution.