Sanghai Corporation is planning to purchase a cost efficient fully automated machine which will reduce acitivties perfomed manually to a great extent. Two alternative models are MA1 and MA2 are available The details of the models are as follows:

	MA1	MA2
	$	$
Cost of Machine	2,000,000	3,000,000
Estimate Life of Machine	5 years	5 years
Savings due to reduction of waste per year	120,000	200,000
Savings due to reduced Direct Wages per year	1,400,000	1,800,000
Indirect Expenses per year	80,000	100,000
Cost of Spares per year	600,000	800,000
Repairs and Maintenance Costs per year	90,000	170,000

Depreciation is to be provided on straight line basis. The company pays tax at the rate of 30%.

i. Calculate the Annual CFAT for both the machines. (8 Marks)

ii. Evaluate both the machines based on NPV and give your recommendations. (The discounting

rate 12%)