The Shankar & Kankar Blended Basmati Rice Company is contemplating the purchase of a new high-speed, multi-feature Blending System (with multiple crushing, sizing, coloring, polishing, blending, etc features) to replace the existing traditional Crushing Machine. The existing crushing machine was purchased 2 years ago at cost of Rs 1,650,000; it was being depreciated under the straight-line method. The existing grinder is expected to have a usable life of 5 more years. The new Blending System costs Rs 2,250,000 and requires Rs 150,000 in installation charges. The new Blending System has 5 years usable life and would be depreciated by straight line method. The company can currently sell the existing grinder for Rs 450,000 without incurring any removal or cleanup costs. To support the increased business resulting from the purchase of Blending System, working capital requirements of a company would increase by Rs 90,000. At the end of its useful life of 7 years, the existing Crushing Machine is expected to have a scrap value of zero; the new grinder is expected to have Rs 150.000 at the end of its life. It is expected that the new Blending System will generate an estimated annual saving or incremental profit before depreciation and taxes per year of Rs 975,000. The company would pay tax at the rate of 35% (yearly).

Required (for all parts use the cash flow basis): [a] Calculate the initial investment associated with the replacement of the existing Crushing Machine by the new Blending System. [b] Determine the incremental operating cash inflows associated with the proposed Blending System. [c] Determine the terminal cash flows expected at the end of year 5 from the proposed Blending scrap value System replacement of the old Crushing Machine.