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The MF, Inc. has a proposed contract with the PT Company. The initial investment in land and equipment will be P1,200,000. Of this amount, P700,000 is subject to five-year depreciation. The balance is the cost of the land. The contract covers six years. At the end of six years, the lands will be sold for P500,000. The depreciated assets will have zero resale value at the end of 6 years. The contract will require an additional investment of P550,000 in working capital at the beginning of the first year and, of this amount, P250,000 will be returned to the MF, Inc. at the end of six years. Loss on assets will be recognized according to income tax laws. The contract with the client to provide the necessary maintenance on computer facilities will produce P520,000 in income before depreciation and taxes for each of the six years. The corporation is in a 40 percent tax bracket and has an eleven percent cost of capital. A. The initial cash flow will amount to: B. Assuming that at that at the start of the fourth year, the company had learned that the depreciable asset had an estimated salvage value of P50,000 upon retiring the asset at the end 6 years. However, the company used the predetermined depreciation amount in computing its taxable income. The terminal cash flow will amount to:

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