Pawell Corporation, a sizeable diversified manufacturer of aircraft components, is trying to determine the initial investment required to replace an old machine with a new, more sophisticated model. The present machine is working correctly, but in order to upgrade it with new technology, they purchased a new machine for Rs. 5 crore and an additional Rs. 5 lakhs will be required to install it. After the depreciation, the value of the machine becomes zero, but the owner is not ready to analyse the situation. Finally, the firm has found that a buyer is willing to pay Rs. 2 crores for the present machine and the firm refused it. (i) Find out which decision is taken by the manager and also suggest whether the decision was favourable or not. (ii) Which values are overlooked by the entrepreneur in the above case?

Pawell Corporation, a sizeable diversified manufacturer of aircraft co

1.	Pawell Corporation, a sizeable diversified manufacturer of aircraft components, is trying to determine the initial investment required to replace an old machine with a new, more sophisticated model. The present machine is working correctly, but in order to upgrade it with new technology, they purchased a new machine for Rs. 5 crore and an additional Rs. 5 lakhs will be required to install it. After the depreciation, the value of the machine becomes zero, but the owner is not ready to analyse the situation. Finally, the firm has found that a buyer is willing to pay Rs. 2 crores for the present machine and the firm refused it. (i) Find out which decision is taken by the manager and also suggest whether the decision was favourable or not. (ii) Which values are overlooked by the entrepreneur in the above case?
Answer» Pawell Corporation, a sizeable diversified manufacturer of aircraft components, is trying to determine the initial investment required to replace an old machine with a new, more sophisticated model. The present machine is working correctly, but in order to upgrade it with new technology, they purchased a new machine for Rs. 5 crore and an additional Rs. 5 lakhs will be required to install it. After the depreciation, the value of the machine becomes zero, but the owner is not ready to analyse the situation. Finally, the firm has found that a buyer is willing to pay Rs. 2 crores for the present machine and the firm refused it. (i) Find out which decision is taken by the manager and also suggest whether the decision was favourable or not. (ii) Which values are overlooked by the entrepreneur in the above case?

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