5. A company is considering the replacement of its existing machines which is obsolete and unable to meet the rapidly rising demand for its product. The company is faced with two alternatives: (i) to buy Machine A which is similar to the existing machine or (ii) to go in for Machine B which is more expensive and has much greater capacity. The cash flows at the present level of operations under the two alternatives are as follows: Cash flows (in lakhs) at the ned of the year: 0 1 2 3 4 5 Machine A -25 5 14 20 14 -40 Machine B 10 14 16 17 15 The company's cost of capital is 10%. The finance manager tries to evaluate the machine by calculating the following: 1. Net Present value 2. Discounted Payback period. At the end of his calculations, however, the finance manager is unable to make up his mind as to which machine to recommend. You are required to make their calculation and, in the light, thereof to advise the finance manager about the proposed investment. (8 marks) Note: Present value of Re 1 at 10% discount rate are as follows: Year 0 1 2 3 4 5 P.V. 191 .83 .75 .68 .62