Jones Ltd. a food manufactureris considering purchasing a new machine for £275,000. The company is expectingan annual cash inflow of £85,000 from the sale
of products and an annual cashoutflow of £12,500 for each of the six years of the machine’s useful life. Theannual cash outflows do not include annual depreciation charges for themachine. The machine is depreciated using the straight-line method. The machineis expected to last for six years, with a residual value estimated to be at therate of 15% of the original cost of the machine. The cost of capital for JonesLtd. is 12%.