A machine purchased six years ago for $150,000 has been depreciated (on a straight-line basis) to a book value of $90,000. It originally had a projected life of 15 years and ZERO salvage value. A new machine will cost $220,000 and result in a reduced operating cost of $30,000 per year. The transportation cost on the new machine is $50,000 and is agreed to be borne by the seller and buyer in 2:3 ratio. Installation charges of $24,000 would be paid by the seller of the machine.

The older maxhine would, if sold now, fetch $50,000. Cost of capital of the company is 10% (after tax). The NEW machine will be depreciated on a straight line basis over its 9 year life with $25,000 salvage value. Assume that the tax rate on company's income is 55%.

Determine whether the old machine is worth replacing based on:

A) NPV method B) Profitability Index method

Also, calculate the ACCOUNTING RATE OF RETURN in its two versions for this replacement decision