(Solved): Q(1) There are two alternatives of replacing a machine. The details of the alternatives are as fol ...

Q(1) There are two alternatives of replacing a machine. The details of the alternatives are as follows: Alternative Purchase value of the new machine : Rs. 2,00,000 Life of the machine : 10 years Salvage value of the new machine at the end of its life: Rs. 20,000 Annual operation and maintenance cost : Rs. 40,000 Buyback price of the existing machine : Rs. 25,000 Alternative 2 Purchase value of the new machine : Rs. 3,00,000 Life of the machine : 10 years Salvage value of the new machine at the end of its life : Rs. 15,000 Annual operation and maintenance cost : Rs. 35,000 Buyback price of the existing machine : Rs. 5,000 Suggest the best replacement option for the company using the annual equivalent cost method of comparison by assuming 20% interest rate, compounded annually.