Please help in solving capital budgeting problem

Thomson Ltd., a food manufacturer, is considering purchasing a new machine for £300,000. The annual running costs are expected to be £20,000 plus straight line depreciation charge. The machine is expected to last for 4 years, after which the machine will be scrapped for an estimated amount of 20% of the original cost. The annual revenue is forecasted to be £80,000 and the cost of capital is 10 %. 

 

My doubts, i am unable to understand how to calculate PBP, NPV, ARR and IRR

My main problem is i am not getting idea how to use working capita in all the 4. I know all the problems but i forget about working capital issues. please help me by suggesting me on all four methods how to use working capital.

Replies (1)

PBP--Pay Back Period it is a period within which your total investment get covered in the above problem investment is 300000

and annual revenus is 80000 but after charging  expense and depreciation the annual cash flow becomes NIL there fore it is not possible to calculate PBP in this problem

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