The directors of Beta Limited are contemplating the purchase of a new machine to replace a machine which has been in operation in the factory for the last 5 years. Ignoring interest but considering tax at 50% of net earnings, suggest which of the two alternatives should be preferred. The following are the details: Purchase price Estimated life of machine Machine running hours per annum Units per hour OLD MACHINE 40,000 10 years 2,000 24 NEW MACHINE 60,000 10 years 2.000 36 Wages per running hour 5.25 Power per annum 2,000 4,500 Consumables stores per annum 6,000 7,500 All other charges per annum 8,000 9,000 Materials cost per unit 0.50 0.50 Selling price per unit 1.25 1.25 You may assume that the above information regarding sales and cost of sales will hold good throughout the economic life of each of the machines. Depreciation has to be charged according to straight-line method. Solution