Prospect Limited is considering investing in some new plant. The plant would cost £1,000,000 to implement. It
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Additional information:
1 All sales are made and all purchases are obtained on credit terms.
2 Outstanding trade debtors and trade creditors at the end of each year are expected to be as follows:
3 Expenses would all be paid in cash during each year in question.
4 Taxation would be paid on 1 January following each year end.
5 Half the plant would be paid for in cash on 1 April Year 0, and the remaining half (also in cash) on 1 January Year 1. The resale value of £50,000 will be received in cash on 31 March Year 6.
Required:
Calculate the annual net cash flow arising from the purchase of this newplant.
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