=2/A company is planning to replace a machine with a new, better-performing one. The figures for the investment are as follows:

◦ Purchase of new machine:

◦ cost €2m;

◦ useful life five years, residual value nil;

◦ linear depreciation over five years;

◦ savings on charges €0.8m per year.

◦ Sale of second-hand machine:

◦ purchase cost €1.5m (machine bought the previous year);

◦ linear depreciation over five years (residual value is nil);

◦ net book value today €1.2m;

◦ potential sale price €1.0m.