Describe different methods of depreciation an equipment

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Reference no: EM13152954

A chemical plant needs to be revamped so as to continue in service for next 12 years. There are two options in front of the Management: Option-1 : Spend Rs 5.8 crore now for satisfactory operation of next 12 yrs. Option-II : Spend Rs 5.0 crore now and after 8 years, spend another Rs. 2.5 crore for a total satisfactory operation of 12 yrs. Which option should be selected if no inflation is considered ? If inflation at the rate of 7% (end-of-year compounding) is assumed for all future costs, then which option is more attractive ? For what rate of inflation, both the options are equally attractive ? Describe two different methods of "Depreciation" an equipment / plant may undergo (with numerical example)

Reference no: EM13152954

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