ABC Company Ltd. is faced with the problem of replacing a machine. Two machines are available in the market. Both require initial outlay of Tk. 10,000 and have a life of 5 years. The company required rate of return is 10% and pays tax @ 50%. Depreciation and investment allowances are as follows :Depreciation : 1st year 80% of cost and 2nd year 20% of cost.Investment allowance : 1st year 20% of cost. Cash inflows are as follows (before tax) :
12345Machine-14,0004,0004,0004,0004,000Machine-26,0003,0002,0005,0004,000Determine :

Question

ABC Company Ltd. is faced with the problem of replacing a machine. Two machines are available in the market. Both require initial outlay of Tk. 10,000 and have a life of 5 years. The company required rate of return is 10% and pays tax @ 50%. Depreciation and investment allowances are as follows :

Depreciation : 1st year 80% of cost and 2nd year 20% of cost.

Investment allowance : 1st year 20% of cost. Cash inflows are as follows (before tax) :

	1	2	3	4	5
Machine-1	4,000	4,000	4,000	4,000	4,000
Machine-2	6,000	3,000	2,000	5,000	4,000

Determine :

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ABC Company Ltd. is faced with the problem of replacing a machine. Two machines are available in the market. Both require initial outlay of Tk. 10,000 and have a life of 5 years. The company required rate of return is 10% and pays tax @ 50%. Depreciation and investment allowances are as follows :Dep

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