ABC Ltd. is considering to replace one of its existing machines at a cost of ₹ 4

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ABC Ltd. is considering to replace one of its existing machines at a cost of ₹ 4

ABC Ltd. is considering to replace one of its existing machines at a cost of ₹ 4,00,000. The existing machine can be sold at its book value i.e., 90,000. However, it has a remaining useful life of 5 years with salvage value nil. It is being depreciated @ 20% WDV.
The new machine can be sold for 2,50,000 after 5 years when it will be no longer required. It will be depreciated by the firm @ 30% WDV. The new ma- chine is expected to bring savings of 1,00,000 p.a. Should the machine be replaced given that (i) the tax rate applicable to firm is 50% and the required rate of return is 10% (Tax on gain/loss on sale of asset is to be ignored)

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