The following information were furnished to you by a prospective investor relating to a capital project wherein he is interested to invest:

Net invoice cost of new equipment P 670,500

Working Capital required to put the project into use 85,000

Incidental costs for freight, insurance, customs duties 50,500

Estimated proceeds from sale of old equipment 110,000

Loss on sale of old equipment being replaced 28,000

Estimated cost of repair of old machine 25,000

Annual incremental income before depreciation and tax 80,000

Estimated life of new equipment 5 years

Annual depreciation of old equipment 26,700

Income tax rate 25%

a. Compute for the initial investment of the capital project.

b. Assuming straight-line depreciation method is used, how much is the incremental depreciation expense for replacing the old machine. Indicate negative sign if decrease

c. Compute for operating cash flow of the equipment. Indicate negative sign if cash outflow.