Your friend has sold his ancestral lot in Cavite for P6,000,000. He wants to invest his money amounting to P1,600,000 to earn a return of 14%. You are helping him in evaluating the following investment opportunities:

Produce wooden toy Distribute an imported product Cost of investment required P 1,400,000 P200,000 Working capital investment required 200,000 1,400,000 Annual cash inflows after tax 500,000 400,000 Residual value of equipment after six years 100,000 O Life of the project 6 years 6 years