Mahima Enterprises is considering replacing an old machine with a new one. The old machine bought a
Question:
Mahima Enterprises is considering replacing an old machine with a new one. The old machine bought a few years ago has a book value of Rs 90,000 and can be sold for Rs 90,000. It has a remaining useful life of five years, after which its net salvage value is expected to be Rs 10,000. It is depreciated annually at a rate of 20 percent under the WDV method. The new machine costs ₹400,000. It is expected to fetch a net redemption value of ₹25,000 after 5 years. It will be depreciated annually at a rate of 25 percent under the WDV method. The investment in working capital will not change with the new machine. The tax rate for the business is 35 percent.
Calculate the cash flow associated with the replacement proposal if all other costs remain unchanged. in excel
Intermediate Financial Management
ISBN: 978-1285850030
12th edition
Authors: Eugene F. Brigham, Phillip R. Daves