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Geometric Limited has the intention to purchase a new machine and has a choice between the following two machines: A B Initial cost Rs 112
Geometric Limited has the intention to purchase a new machine and has a choice between the following two machines: A B Initial cost Rs 112 500 Rs 110 000 Expected economic life 5 years 5 years Expected disposal/residual value Rs 8 500 0 Expected net cash inflows End of: Year 1 Year 2 Year 3 Year 4 Year 5 Rs - 36 000 24 000 46 000 43 500 Rs 35 000 35 000 35 000 35 000 35 000 The company estimates that its cost of capital is 7%. Required: (a) Calculate the payback period for both machines. (answers must be expressed in years, months and days)
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