1. Bug Busters of Antarctica, Inc. is considering replacing a machine with a new machine that has a four-year life. The purchase of this new machine has a cost of Rs 700,000, shipping cost of Rs 80,000, and an installation charge of Rs 20,000. This machine will not require any additional working capital. The "old" project can be salvaged for Rs 120,000 currently. The "old" machine has four years' useful life remaining with a depreciation expense of Rs 20,000 for each of those years and was originally purchased six years ago for Rs 200,000. The "new" project will not generate additional revenues, but will decrease operating expenses by Rs 90,000 for each year of the four-year project. For tax purposes, the equipment will be depreciated @ 30% using WDV method. The company is subject to a marginal tax rate of 40%. The salvage value at the end of the fourth year for the "new" project is expected to be Rs 50,000. Compute the following: i) Net incremental cash flows for the project ii) Compute the NPV and IRR of the project for project acceptance at 10% hurdle 2 Adam Smith icongidouin l