Superior Tasty Soup (STS) Limited a fast food company is considering purchasing a new storage machine for £438,700. The company is expecting an annual cash inflow of £123,000 from the sale of its products and an annual cash outflow of £25,500 for each of the six years of the machine's useful life. The annual cash outflows do not include annual depreciation charges for the machine. The machine is depreciated using 27% reducing method. The machine is expected to last for six years, with a residual value estimated to be at the rate of 15% of the original cost of the machine. The cost of capital for (STS) Limited is 13%.
Superior Tasty Soup (STS) Limited a fast food company is considering purchasing a new storage machine for £438,700. The company is expecting an annual cash inflow of £123,000 from the sale of its products and an annual cash outflow of £25,500 for each of the six years of the machine's useful life. The annual cash outflows do not include annual depreciation charges for the machine. The machine is depreciated using 27% reducing method. The machine is expected to last for six years, with a residual value estimated to be at the rate of 15% of the original cost of the machine. The cost of capital for (STS) Limited is 13%.
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter12: Capital Budgeting: Decision Criteria
Section: Chapter Questions
Problem 22P: The Scampini Supplies Company recently purchased a new delivery truck. The new truck cost $22,500,...
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