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Funny Girl Company manufactured mannequins for department stores. It planned to replace its entire set...

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Accounting

Funny Girl Company manufactured mannequins for department stores. It planned to replace its entire set of shop floor tools with a mechanized tool set. Management expected to reduce labor costs with the new tools. The present tools had a remaining life of 5 years, a book value of P21,540 and zero scrap value. The new equipment could be purchased a price of P 285000. It had a useful life of 5 years and a salvage value of P20000. Funny Girl Companys management believed that it could sell the new equipment after 5 years od use to other mannequin shops for P35000. Funny Girl sold about 100 mannequins annually at a selling price of P2500 per mannequin. With the new mechanized tools, direct labor were reduced from P2250 per unit to P 1650. All other costs except for depreciation would remain at previous levels. The income tax rate of the company was 35 percent.

a. Determine the investment cash flow proposal

b. Estimate the incremental cash flow of the proposal

c. What will be the periodic cash flow of the proposal?

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