9. The Manekshaw Company is considering the purchase of a new machine. The old machine is in good working condition, and will last for six years. However, the new machine will operate efficiently. It is expected that materials, labour and other direct expenses of the operations will be saved to the extent of 16 million per year. The new machine will cost 80 million and will be useful for six years. The old machine has a book value of 64 million. The after-tax minimum required rate of return expected by the company is 10 per cent. Assume straight-line depreciation and a 30 per cent tax rate of income. Assume that profit or loss from the sale of the assets are taxed at 30 per cent. What action should be taken by the company if

(a) the salvage value of the old machine is zero;

(b) the salvage value of the old machine today is 16 million and if retained for six years it has zero salvage value; and

(c) the salvage value of the old machine today is 16 million, and if retained for six years, its salvage value will be *8 million. Also assume that assets are depreciable at 15 per cent written-down method.