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.
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