Erika Mae Corporation is interested in purchasing a state-of-the-art widget machine for its manufacturing plant. The new machine has been designed to basically eliminate all errors and defects in the widget- making production process. The new machine will cost P150,000, and have a salvage value of P70,000 at the end of its seven-year useful life. Riordan has determined that cash inflows for years 1 through 7 will be as follows: P32,000; P57,000; P15,000; P28,000; P16,000; P10,000, and P15,000, respectively. Maintenance will be required in years 3 and 6 at P10,000 and P7,000 respectively. Erika Mae uses a discount rate of 11 percent and wants projects to have a payback period of no longer than five years. Present value tables or a financial calculator are required.

a. Compute the net present value of the new machine.

b. Compute the firm's profitability index.

c. Compute the payback period.

d. Evaluate this investment proposal for XYZ Co.