Scenario:

The management of Q Limited is considering purchasing one of two mutually exclusive machines. The company’s cost of capital is 10% and tax rate is 25%. Details of the machines are as follows:

	Machine A	Machine B
Cost of machine	12,00,000	18,00,000
Expected life	4 years	5 years
Annual Income before Depreciation & Tax	4,00,000	5,50,000
Depreciation	Straight-line	Straight-line

Requirements:

1. Calculate the payback period.
2. Calculate the NPV.
3. Calculate the IRR.

Determine which machine should be selected.