The following details relates to the two machines X and Y:

Question

Machine X Machine Y
Cost
Estimated Life
Estimated salvage value
Working Capital required in the beginning Rs. 56,125 Rs.56,125
5 years 5 years
Rs. 3,000 Rs. 3,000
Rs.10,000 Rs. 20,000


Annual income after tax and depreciation:

Year Rs. Rs.
I 3,275 11,375
II 5,375 9,375
III 7,375 7,375
IV 9,375 5,375
V 11,375 3,375

Overhauling charges at the end of third year Rs. 25,000 on machine X. Depreciation has been charged at straight line method. Discount rate is 10%? P.V.F. at 10% for five years are 0.909, 0.826, 0.751, 0.683 and 0.621. Suggest which project should be accepted.

Answer 1

Please see your next post, which I saw first.

Sra