1. President Snow uses a labor-intensive manufacturing process. Existing equipment has a book value of P 20,000, a five-year remaining life, and a P 12,000 market value.Annual depreciation is P 4,000 and cash operating costs is P 64,000.The proposed process requires machinery costing P 100000 with a useful life of five years and no salvage value.The new machinery, which will replace the old one, requires P 40,000 in annual cash costs.Straight-line depreciation will be used for tax purposes for the new machine.The tax rate is 30% and the cost of capital is 12%.

1. What is the net investment on the new equipment?
2. What is the annual net cash inflow from the new equipment?