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KLM Enterprises is considering the purchase of one of two machines. The company's cost of...

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Question

Accounting

KLM Enterprises is considering the purchase of one of two machines. The company's cost of capital is 13% and the tax rate is 30%. Details are given below:

Particulars

Machine G

Machine H

Cost of machine

21,00,000

25,00,000

Expected life

6 years

6 years

Annual Income (before Tax & Depreciation)

6,50,000

7,75,000

Depreciation is charged on a straight-line basis. You are required to calculate: a. Discounted payback period b. NPV c. Profitability index

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