A machine is expected to generate cash saving (after-tax) of Rs. 50,000 per annum over a period of 5 years. Salvage value of machine is 40% of the original cost. If accounting rate of return is 20%, cost of two such machines will be

\({\rm{Depreciation\;per\;annum\;}} = \left( {\frac{{x - 0.4x}}{5}} \right)\)

x is assumed as the initial cost of the machine

\(ARR = \left[ {\frac{{50,000 - \frac{{0.6x}}{5}}}{x}} \right] = 0.2\)

\(50,000 - \frac{{6x}}{{50}} = 0.2x\)

\(50,000 = 0.2x + \frac{{6x}}{{50}}\)

\(50,000 = \frac{{10x + 6x}}{{50}}\)

16x = 50 × 50,000

16x = 25,00,000

\(x = \frac{{25,00,000}}{{16}}\)

∴ x = 156250

∴ 2x = 312500