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STU Enterprises is planning to invest in new machinery to increase production. The details are given below. The corporate tax rate is 29%, and the

STU Enterprises is planning to invest in new machinery to increase production. The details are given below. The corporate tax rate is 29%, and the interest on capital is 10%.

Particulars

Machine X (Rs)

Machine Y (Rs)

Machine Z (Rs)

Initial Investment

11,00,000

12,00,000

13,00,000

Estimated Annual Sales

14,00,000

15,00,000

16,00,000

Cost of Production:




Direct Material

1,30,000

1,40,000

1,50,000

Direct Labour

1,40,000

1,50,000

1,60,000

Factory Overhead

1,60,000

1,70,000

1,80,000

Administration Cost

65,000

70,000

75,000

Selling & Distribution Cost

55,000

60,000

65,000

The economic life of Machine X is 6 years, while it is 7 years for the other two. The scrap values are Rs. 1,20,000, Rs. 1,30,000, and Rs. 1,40,000 respectively. Determine the payback period for each machine to identify the best investment.

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