kindly solve part-b. please accurate Superior Tasty Soup (STS) Limited a fast food company is considering purchasing a new storagemachine for £438,700. The company is expecting an annual cash inflow of £123,000 from the sale of itsproducts 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 isdepreciated using 27% reducing method. The machine is expected to last for six years, with a residualvalue estimated to be at the rate of 15% of the original cost of the machine. The cost of capital for (STS)Limited is 13%.You are required to:(a) Calculate (to two decimal places) using the following investment appraisal techniques, andprovide brief recommendations as to the economic feasibility of acquiring the machine:i.The Payback Period.The Accounting Rate of Return.The Net Present Value.The Internal Rate of Return(eoce)(ROCE)-AMii.iii.iv.(b) Alternatively, the financial director of (STS) Limited is proposing to use 40% the total capitaloutlay for the above investment to repurchase some of the equity capital and the remaining funds to payfor cash dividends. Ensuring the response draws upon relevant academic research within this highlytopical area of financial management, critically evaluate the effects of this proposal on the company.

(b) Positive effects of the proposal : 1. Ownership of the existing shareholders who opt out for buy…

Answered: kindly solve part-b.

Business

Accounting

kindly solve part-b.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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