10. Two machines are not identical in many respects. Following are the information regarding the two. The estimated life of both the machines is five years leaving no salvage value at the end.

Machine Cost (`)

Anticipated CFAT (` in lakh) per year 1 2 3 4 5 M 6,25,000 Nil 1,25,000 5,00,000 3,50,000 1,50,000 N 10,00,000 2,50,000 3,50,000 4,00,000 4,25,000 2,00,000 The company’s cost of capital is 16%. You are required to make an appraisal of the two machines and advise the company using (i) NPV and (ii) IRR.

Given, PV of `1.

End of Year 16% 18% 20%

1 0.862 0.847 0.833 2 0.743 0.718 0.694 3 0.641 0.609 0.579 4 0.552 0.516 0.482 5 0.476 0.437 0.402