3. R Ltd. presently considering two machines for possible purchase. Other information related to the machines are as follows:

Particulars Machine 1 Machine 2 Estimated Life (years) 4 4 Purchase Price (`) 50,000 60,000 Cash Flow before Depreciation and tax (`)

Year 1 25,000 45,000 Year 2 25,000 19,000 Year 3 25,000 25,000 Year 4 25,000 27,000 Rate of tax is 40%.

Compute the NPV of each machine assuming a cost of capital of 8%. Which machine should the company buy?