Sangeeta Enterprises is determining the cash flow for a project involving

replacement of an old machine by a new machine. The old machine bought a few

years ago has a book value of Rs.2,800,000 and it can be sold to realise a post

tax salvage value of Rs.2,200,000. It has a remaining life of five years after

which its net salvage value is expected to be Rs.900,000. It is being depreciated

annually at a rate of 30 percent the WDV method. The working capital associated

with this machine is Rs.1.000,000.

The new machine costs Rs.8,000,000. It is expected to fetch a net salvage

value of Rs.3,500,000 after five years. The depreciation rate applicable to it is

25 percent under the WDV method. The new machine is expected to bring a

saving of Rs.1,000,000 annually in manufacturing costs (other than

depreciation).The incremental working capital associated with the new machine is

Rs.600,000. The tax rate applicable to the firm is 33 percent.

Estimate the cash flow associated with the replacement project.