ABC Ltd. is considering purchasing new machines that should produce considerable cost savings in its assembly operations. The cost of each machine is $25,000 and neither is expected to have a salvage value at the end of a 4-year useful life. ABC Ltd. Company's required rate of return is 12% and the company prefers that a project return its initial outlay within the first half of the project's life. The annual after-tax cash savings for each machine are provided in the following table:

Year            Machine A           Machine B
1                       10,000                  15,000

2                      10,000                   12,000

3                      10,000                     8,000

4                      10,000                    5,000

Total               40,000                  40,000

Required:

A) Compute the payback period for each machine.

B) Compute the net present value for each machine.

C) Which machine should be purchased?

D) Rank the project using Profitability index.