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Find should replace the old machine

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Question 1: A Machine purchased six years ago for Rs 150,000 has been depreciated to a book value of Rs 90,000. It originally has projected life of 15 years and Zero salvage value. A new machine will cost Rs 250,000 and result in reduce operating cost of Rs 30,000 per year for the next nine years. The older machine could be sold for Rs 50,000. The new machine will be depreciated on a straight line basis over nine year life with Rs 25,000 salvage value. The company tax rate is 50% and cost of capital is 10%. Should we replace the old machine?

Given: PV of Rs 1 at 10% on 9th year=0.424, and PV of an annuity of Rs 1 at 10% for 8 years=5.335

Reference no: EM132553882

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