18. A machine purchased six years ago for `1,50,000 has been depreciated to a book value of `90,000. It originally had a projected life of 15 years with no salvage value. There is a proposal to replace the machine. A new machine will cost `2,50,000 and result in reduction of operating cost by `30,000 p.a. for the next nine years. The existing machine can now be scrapped away for `50,000. The new machine will also be depreciated over 9 years as per S.L.M with salvage of `25,000. Find out whether the existing machine be replaced given that the tax rate applicable is 50% and cost of capital is 10% (profit or loss on sale of asset is to be ignored for tax purpose). [C.S Final June 1995]