A company is evaluating the investment in new machinery to manufacture a new product. Two alternatives (Machine A and Machine B) are being considered. Estimates for the two machines are: Initial cost Useful life Residual value at the end of 5 years Annual profits (net of straight-line depreciation) The company has a cost of capital of 12% per annum. Discount factors: Year 1 2 3 4 10% 0.909 0.826 0.751 0.683 0.620 Machine A $800,000 12% 0.893 0.797 0.712 0.636 0.567 5 years $120,000 $100,000 15% 0.870 0.756 0.658 0.572 0.497 Machine B $760,000 5 years $60,000 $80,000 Required: Evaluate each machine using the following methods of capital appraisal: 20% 0.833 0.694 0.579 0.482 0.402 (i) Payback period in years. (ii) Net present value in $ (work to nearest $'000). (iii) Internal rate of return in % (use 12% and 20% as discount factors). (iv) Profitability index in %.