1) A firm is considering replacement of an equipment, whose first cost is Rs. 4,000 and the scrap value is negligible at the end of any year. Based on experience, it was found that the maintenance cost is zero during the first year and it increases by Rs. 200 every year thereafter. (Compute for first 10 years of service to arrive at a conclusion) (a) When should the equipment be replaced if the discount rate is 0%? (b) When should the equipment be replaced if the discount rate is 12%?

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