City Bank Limited is planning to install an intercom communication system. The price of inter come machine is Rs 550,000. In addition to this, it will have to spend Rs 20,000 to carry the machine…

City Bank Limited is planning to install an intercom communication system. The price of inter come machine is Rs 550,000. In addition to this, it will have to spend Rs 20,000 to carry the machine from the dealer, modification cost is Rs 15,000 and, installation cost is Rs 5,000. The present receptionist is drawing Rs 30,000 monthly salaries. The same receptionist will handle the intercom service. The company has estimated that this machine will run for 5 years to come. The company can control outgoing calls and long-distant calls through this system. So, it can save Rs 150,000 each year. Straight line method of depreciation is used. The expected salvage value is Rs 40,000. However, the machine can be sold for Rs 60,000 at the end of the fifth year and company's tax rate is 20 percent. Required a. What will be the initial investment of City Bank Ltd.? b. What will be the depreciation each year? c. What will be the annual operating cash saving? d. What will be the terminal cash flow of the machine? e. Should the City Bank Install the system? Discounting rate is 10 percent.