Question: Machine A was purchased five years back ago for Rs. 200,000 and produces an annual cash Bow of Rs 80,000. It has no salvage value

Machine A was purchased five years back ago for Rs. 200,000

Machine A was purchased five years back ago for Rs. 200,000 and produces an annual cash Bow of Rs 80,000. It has no salvage value but is expected to last another three years, producing the same cash flow. The company can replace Machine A with Machine B either now or at then of three years. Machine B will have an initial investment of Rs. 120,000/= and will produce cash flow of Rs. 110,000 (Year One), Rs. 121,000 (Year Two) and Rs1,33,000 (Year Three). What should it do? The opportunity cost of capital is 10%

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