The management of JKL Ltd. is evaluating the purchase of two different machines. The cost of capital is 8% and tax rate is 30%. Details of the machines are as follows:

• Machine X:
  • Cost: $800,000
  • Expected Life: 4 years
  • Annual Cash Flow: $220,000
• Machine Y:
  • Cost: $1,000,000
  • Expected Life: 5 years
  • Annual Cash Flow: $270,000

Requirements:

1. Compute the payback period.
2. Compute the NPV for both machines.
3. Compute the IRR for both machines.
4. Decide which machine to purchase.