Machine x Machine Y Rs. Rs. Capital Cost Sales at standard Price Costs: La

Machine x Machine Y
Rs. Rs.
Capital Cost
Sales at standard Price
Costs:
Labour
Materials
Factory Overheads
Administration Cost
Selling Costs
Expected life in years 60000
100000
10000
8000
12000
4000
2000
2 60000
80000
6000
10000
10000
2000
2000
3
Other Information:
The costs shown above relate to annual expenditure resulting from each machine. Sales
are expected to continue at the rates shown for each year for the full life of each machine;
Tax to be paid may be assumed at 50% of net earnings;
Interest on capital is to be ignored;
The appropriate rate of interest for converting to present value may be taken at 10%.
On the basis of the facts given above show the most profitable investment by the following methods.
Pay-back Period
Return on Investment; and
Net Present Value on Investment.