VWX Ltd is planning to invest in new machinery to enhance production. Three machines are being considered. The details of estimated yearly expenditure and sales are provided below. All sales are on cash basis. Corporate income-tax rate is 36%. Interest on capital may be assumed to be 7%.

Particulars	Machine 1 (Rs)	Machine 2 (Rs)	Machine 3 (Rs)
Initial investment	3,50,000	4,25,000	4,00,000
Estimated annual sales	6,00,000	6,75,000	6,50,000
Cost of production:
Direct material	55,000	60,000	58,000
Direct labour	65,000	70,000	68,000
Factory overhead	75,000	80,000	78,000
Administration cost	26,000	28,000	27,000
Selling & Distribution cost	18,000	20,000	19,000

The economic life of machine 1 is 2 years, while it is 3 years for the other two. The scrap values are Rs. 50,000, Rs. 60,000 and Rs. 55,000 respectively. Ascertain the most profitable investment based on the payback period method.