*37* - Greek Ltd,a firm manufacturing and selling electrical appliances, is planning to replace their current machine with a new and advanced machine. The old machine bought a few years ago has a book value of Rs. 12 lakhs and it can be sold to realise a post-tax salvage value of Rs. 15 lakhs. It has a remaining life of 4 years after which its net salvage value is expected to be Rs. 3 lakhs. It is being depreciated annually at a rate of 25 percent under WDV method. The new machine costs Rs. 50 lakhs. It is expected to fetch a net salvage value of Rs. 24 lakhs after 4 years. The depreciation rate applicable to it is 25 percent under WDV method. The incremental working capital associated with this machine is Rs. 8 lakhs and it is expected to be recovered at its book value at the end of 4 years. The new machine is expected to bring a savings of Rs. 9 lakhs annually in manufacturing costs (other than depreciation). The tax rate applicable to the firm is 32 percent. The overall cost of capital of the firm is estimated to be 10%. Estimate the cash flow associated with the replacement project.

On the basis of NPV, Advise the company whether the replacement is beneficial. Ignore the tax implications on capital gains/loss, if any.