Posted by **Neeraj** on Saturday, October 16, 2010 at 10:40am.

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

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.

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