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TUV Ltd. is considering the purchase of two different machines. The company's cost of capital is 10% and the tax rate is 32%. Details are as follows:
Particulars | Machine M | Machine N |
Cost of machine | 17,50,000 | 20,00,000 |
Expected life | 6 years | 6 years |
Annual Income (before Tax & Depreciation) | 5,00,000 | 6,50,000 |
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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