Orion Manufacturing Ltd., a mid-sized engineering company, is facing increasing competition and rising labour costs. To improve efficiency and…

Orion Manufacturing Ltd., a mid-sized engineering company, is facing increasing competition and rising labour costs. To improve efficiency and reduce dependency on manual labour, the management is considering automating a part of its production process. After preliminary research, the company has shortlisted two advanced machines: Model X-Pro and Model Z-Elite. Both machines can perform the same operations currently handled by workers, but differ in cost and efficiency levels. The finance team has gathered the following data to evaluate the investment decision. Particulars Model X-Pro Model Z-Elite Cost of Machine 20,00,000 25,00,000 Estimated working life 5 years 5 years Estimated saving in direct wages per annum 7,00,000 9,00,000 Estimated saving in scrap per annum 60,000 1,00,000 Estimated additional cost of indirect material per annum 30,000 90,000 Estimated additional cost of indirect labour per annum 40,000 50,000 Estimated additional cost of repairs and maintenance 45,000 85,000 Depreciation will be charged on a straight line method. Corporate tax rate is 30 percent and expected rate of return may be 12 percent. You are being the finance manager of the company required to analyse both the machine in relation to financial details and answer the following questions (MCQ 1 to 5)