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gama & co. wants to replace its old machine with new automatic machine.it has two models namely model1 & model2 in consideration at the same cost of rs. 500000 each.salvage value of the old machine is rs 100000.the utility of the existing machine can be used if company selected model 1.again additional cost of utility purchased in that case rs.100000 if the purchase model2 than all the existing utility have to replaced with new utilities costing rs.200000.the salvage value of old utilities will be rs 20000.the cash flow are expected to be:
YEAR MODEL1 MODEL2
1 100000 200000
2 150000 210000
3 180000 180000
4 200000 170000
5 170000 40000
SALVAGE VALUE AT THE 50000 60000
END OF 5 YEAR
You are required to compute for two machines separately ( when PV factor at 15% is given for 1st year:0.870 , 2nd year;0.756 ,3rd year 0.658 4th year 0.572 5th year 0.497
(a) net present value
(b)discount pay back period
(c)desirability factor
(d)advise which of the machines to be selected
