MNO Ltd is planning to invest in new machinery to boost production. Three machines are being considered. The details of estimated yearly expenditure and sales are provided below. All sales are on cash basis. Corporate income-tax rate is 33%. Interest on capital may be assumed to be 7%.

Particulars	Machine 1 (Rs)	Machine 2 (Rs)	Machine 3 (Rs)
Initial investment	4,25,000	4,00,000	4,75,000
Estimated annual sales	7,00,000	6,50,000	7,50,000
Cost of production:
Direct material	60,000	55,000	65,000
Direct labour	70,000	65,000	75,000
Factory overhead	80,000	75,000	85,000
Administration cost	24,000	22,000	26,000
Selling & Distribution cost	16,000	14,000	18,000

The economic life of machine 1 is 4 years, while it is 3 years for the other two. The scrap values are Rs. 60,000, Rs. 55,000 and Rs. 65,000 respectively. Find out the most profitable investment based on the payback period method.