Question 1. A company is planning to purchase a new machine to expand its production. There are two brand available A and B in the market. Both the machines are costing OMR 10000. The following cash inflows are expected to come for both the machines.

Years	Machine A	Machine B
1	2400	1200
2	3600	3000
3	5800	4800
4	6000	7600
5	6500	9200

Calculate Pay back period and Discounted Payback period for Machine A and Machine B and comment on which machine is better using the two techniques. The discount rate is 3.05%.

Solution: Payback period

Years	Machine A		Years	Machine B
Outflow			Outflow
1			1
2			2
3			3
4			4
5			5

Solution: Discounted Payback period

Years	Machine A			Years	Machine B
Outflow				Outflow
1				1
2				2
3				3
4				4
5				5