Hope Company is considering two new projects, each requiring an investment of P400,000. Each project will last for 5 years and will earn a net income on the following projects

YearProject A Project B

1P65,000P 70,000

266,00070,000

368,00070,000

464,00070,000

572,00070,000

P335,000P350,000

The project A has no salvage value but Project B has a salvage value of P20,000 at the end of its five-year life. Project A, however, even if there is no salvage value it can still be sold at P15,000 as determined by the management accountant at the end of its useful life or end of 5 years. In addition, Project A also needs some minor repairs at the end of its life amounting to P5,000 before it can be finally sold. Hope Company uses straight-line depreciation and requires a minimum rate of return of 12%.

Present value data are as follows:

Present Value of 1Present Value of an Annuity of 1

Period12%Period 12%

1.8931.893

2.79721.690

3.71232.402

4.63642.905

5.54353.487

6.44163.899

7.41074.332

8.40284.668

9.37894.993

10.341105.398

Instructions

(a)Compute the net present value of each project.