RCB Company bought a 72-inch vertical boring machine 10 years ago for P1,350,000 with an expected life of 20 years. The management anticipates no that the machine will serve well for another 6 years and proposes to purchase a new machine costing P1,800,000 with an estimated life of 16 years. The old machine can be sold now for P900,000. The operating cost of the old machine is P15,000 and for the new machine P7,500 per annum. The salvage value for both machine is 10% of its value regardless of the length of time they are used. If money is worth 10%, should the old machine be replaced? Used Rate of Return method.

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