This question is intended for personal knowledge and not for assignment purpose.

Learning Activity 3 LSM Ltd is considering the replacement of one of its machines. LSM Lid faces a 30% marginal tax rate and uses a 15% discount rate to evaluate equipment purchases for its automobile scrap operation. The appeal of the new machine is that it is more automated (requires two fewer CS Revenue with COUS Cams GP canneremployees to operate the machine). The older machine requires four employees with salaries totaling Tshs 200 million and fringe benefits costing Tshs 20 million. The new machine cuts this total in half. In addition, the new machine is able to separate out the raw materials which reduces the annual cost of defects which are Tshs 20 million with the new machine compared to Tshs 70 million for the older model. However, the added automation feature comes at the cost of higher annual maintenance fees of Tshs 60 million compared to only Tshs 20 million for the older machine. The following information summarizes the new versus old machine costs (Monetary figures in Ishs million): New Old machine Machine Annual cost of defects 20 70 Net operating income 580 580 Book value of equipment 350 100 Salvage value (today) NA 150 Salvage value (Year 5) 50 Shipping cost 20 NA Installation cost 30 NA Remaining project life (years) 5 5 Net operating working capital 60 60 Salaries 100 200 Fringe benefits 10 20 Maintenance 60 20 Required: ned with Should LSM Lid replace the old machine with the new one