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PQR Corporation is considering selecting a machine out of two options. The company's cost of...

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Question

Accounting

  • PQR Corporation is considering selecting a machine out of two options. The company's cost of capital is 8% and the tax rate is 30%. Other information related to both machines is as follows:

Particulars

Machine X

Machine Y

Cost of machine

1,000,000

1,300,000

Expected life

10 years

10 years

Annual Income (before Tax & depreciation)

150,000

200,000

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

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