The Bread Company is planning to purchase a new machine that it will depreciate on straight-line basis over a ten-year period. A full year's depreciation will be taken in the year of acquisition. The machine is expected to produce cash flow, net of income taxes, of P30,000 in each of the ten years. The accounting (book value) rate of return is expected-to be 10% on the initial increase in required investment.
The cost of the new machine will be
a. P120,000
b. P135,000
c. P150,000 d. P300,000