Question: A firm is currently using a machine that was purchased two years ago for Rs . 7 0 , 0 0 0 and has a
A firm is currently using a machine that was purchased two years ago for Rs and has a remaining useful life of years. It is considered to replace the machine with a new one which will cost Rs The cost of installation will amount to Rs The increase in working capital will be Rs The expected cash lows before depreciation and taxes for both machines are as follows: Year Existing Machine New Machine Rs Rs Rs Rs Rs Rs Rs Rs Rs Rs The firm uses the StraightLine Method of depreciation. The average tax on income, as well as on capital gainslosses is Calculate the incremental cash flows assuming the sale value of the existing machine: i Rsii Rsiii Rs and iv Rs
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