A company is examining a possibility of investing in a new machine. Two machines are available, Machine A and Machine B. Both machines require an investment of $450,000 and have a life of six years. The estimated cash flows that each machine is likely to generate over their lives are given below:

Year	Option A	Option B
1	100,000	80,000
2	150,000	90,000
3	150,000	180,000
4	100,000	100,000
5	100,000	150,000
6	100,000	150,000

(a) Calculate the payback period of Machine A and Machine B.

(b) Which machine would you select based on the payback period method? Why? Work and Solution: