Question: 3. A firm is evaluating two mutually exclusive machines. Machine P will require an initial investment of 1,20,000 and provide annual net cash inflows after

3. A firm is evaluating two mutually exclusive machines. Machine P will require an initial investment of 1,20,000 and provide annual net cash inflows after taxes of 42,000 for 6 years. Machine Q will involve an investment of 3,00,000 and provide annual net cash inflows after taxes of 80,000 for 8 years. Machine Q is riskier than machine P. The required rate of return of Machine Q is 14 per cent and of Machine P is 12 per cent. Which machine should be selected?

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