The following data pertain to Sunlight Corp., whose management is planning to purchase an automated tanning equipment:

Economic life of the equipment 8 years.

Disposal value after 8 years 0

Estimated net annual cash inflows for each of the 8 years P81,000

Time-adjusted internal rate of return14%

Cost of Capital of Sunlight Corporation16%

Annual depreciation P46,970

PVAIF for 8 years, 14% 4.639

PVAIF for 8 years, 16% 4.344

Find the required increase in annual cash inflows in order to have the time adjusted rate of return approximately equal to the cost of capital

a.P5,500 - correct answer (asking for step-by-step solutions)

b.P6,500

c.P4,344

d.P5,871