Question: Powertec Bhd is considering whether to purchase a new machine. Machines A and B are available for RM98,000 each. Earnings after taxation are as follows:

Powertec Bhd is considering whether to purchase a new machine. Machines A and B are available for RM98,000 each. Earnings after taxation are as follows:

Year

machine A

(RM)

machine B

(RM)

135,00019,000233,00025,000340,00033,000424,00049,000516,00032,000

By using a discount rate of 10%, you are required to evaluate the two alternatives using the following:

a) Payback method

b) Net present value method

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