Assume that a project requires the purchase of a machine that cost P2 million and will cost P3 million to install.

Question 2

Assume that a project requires the purchase of a machine that cost P2 million and will cost P3 million to install. Additional working capital of P150 000 will also be required when the project is commissioned. The machine will replace an old one that was purchased two years ago at a cost of P500 000 and can now only be disposed for P200 000. The firm has claimed SIA using new rates of 50%, 25% and 25% over the last two years on the old machine. The tax rate is 35%.

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Assume that a project requires the purchase of a machine that cost P2 million and will cost P3 million to install.
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Required: Compute the initial investment of the project

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