(a) A company is considering the replacement of its existing machine which is obsolete and unable to meet the rapidly rising demand for its product.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 it has much greater capacity. The cash flows at the present level of operations under the two alternatives are as follows : The company's cost of capital is 10%. The Finance Manager tries to evaluate the machines by calculating the following : (i) Net present value (ii) Profitability index (iii) Payback period and 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 these calculation and in the light thereof to advise the finance manager about the proposed investment