Question: A company is debating whether to replace its existing machine with a new model that costs Rs.80,000 and has a ten-years life. (If desired, it

A company is debating whether to replace its existing machine with a new model that costs Rs.80,000 and has a ten-years life. (If desired, it can be sold for Rs.40,000 after six years) The new machine will increase revenue from Rs.45,000 to Rs.60,000, while the variable-cost would remain at one-third of the revenue. Fixed cost will go up by Rs.5,000. The existing machine was bought 15 years back for Rs.105,000 and lasts for 21 years. Its current market-value is Rs.20,000. The corporations tax-rate is 40%, and its cost-of-capital is 10%. Should it replace the machine?

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