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rate of 12%, find whether it is worth replacing the present machine with the new machine.

rate of 12%, find whether it is worth replacing the present machine with the new machine.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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do not use excel. manual computation with formula

Two years ago, a machine was purchased at a cost of P2,00,000 to be useful for eight years. Its salvage value at the end of its life is P25,000. The annual maintenance cost is P25,000. The market value of the present machine is P1,200,000. Now, a new machine to cater to the need of the present machine is available at P1,500,000 to be useful for six years. Its annual maintenance cost is P14,000. The salvage value of the new machine is P20,000. Using an interest rate of 12%, find whether it is worth replacing the present machine with the new machine. Your answer
Transcribed Image Text:Two years ago, a machine was purchased at a cost of P2,00,000 to be useful for eight years. Its salvage value at the end of its life is P25,000. The annual maintenance cost is P25,000. The market value of the present machine is P1,200,000. Now, a new machine to cater to the need of the present machine is available at P1,500,000 to be useful for six years. Its annual maintenance cost is P14,000. The salvage value of the new machine is P20,000. Using an interest rate of 12%, find whether it is worth replacing the present machine with the new machine. Your answer
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