Let us assume that previous asset expansion project is actually an asset replacement project i.e., it is replacement of an old exchange with this new exchange.

The original basis of the old exchange was Rs. 30 crores and depreciated using straight-line over five years (Rs. 6 crores per year). The old exchange has two years of depreciation and four years of useful life remaining. The telecom company officials say that the existing money can sell the current machine now for Rs. 6 crores (after five years its scrap value is going to be zero). The new exchange (replacement) will not increase revenues (remain at Rs. 110 crores) but it decreases operating expenses by Rs. 20 crores per year (old = Rs. 90 crores). NWC will rise to Rs. 10 crores from Rs. 5 crores (old).

Find the Pay Back Period, NPV and IRR of the project using Straight Line Depreciation Method (for new exchange)