Nioorman Ltd is considering buying a new machine and has two options, Machine X and Machine Y. Each machine costs $120,000 and will have a five year life with no residual value at the end of that time. The net annual cash inflows for each machine are as follows:

Machine X Machine Y

$ $

Year 1 40,000 25,000

2 40,000 50,000

3 40,000 40,000

4 40,000 45,000

5 40,000 50,000

Normans cost of capital is 12%.

Required:

(a) Calculate the payback period for Machine X and Machine Y. (6 marks)

(b) Calculate the Net Present Value of Machine X and Machine Y using the present value table given below. (16 marks)