ROYAL Company is studying a project that would require a P1,600,000 investment in equipment and 8-year useful life. At the enbd of eight years, the project would be discontinued and the equipment would have no salvage value. The project would provide net income each year as follows: Sales P3,000,000 Less: Variable expenses 1,800,000 Contribution margin 1,200,000 Less: Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs P700,000 Depreciation 200,000 Total fixed expenses 900,000 Net income P 300,000 The company's cost of capital is 18%