How to Upgrade Your Equipment with the Right Capital Investment

Are you looking to upgrade your equipment to a more advanced model?

Do you know how much new capital you need to make the purchase?

Final answer:

To purchase the more advanced model of the equipment costing Rs. 56,000, a new capital of Rs. 45,000 must be supplied.

Explanation:

When considering upgrading your equipment to a more advanced model, it's important to calculate the new capital required for the purchase. In this scenario, the initial equipment costing Rs. 42,000 was put into use 12 years ago with a service life estimated at 20 years. The straight-line depreciation method was used to calculate the depreciation over the years, resulting in a remaining value of Rs. 11,000 for the initial equipment.

The new capital needed for the purchase of the advanced model is determined by subtracting the sale value of the initial equipment from the cost of the new model. In this case, you would need to supply Rs. 45,000 of new capital to acquire the upgraded equipment.

Investing in newer and more advanced equipment can enhance efficiency, productivity, and overall performance in your operations. Make sure to evaluate the financial implications and benefits of upgrading your equipment to make informed decisions for your business.