=+Tenilite uses straight-line depreciation, assuming zero terminal disposal value. For simplicity, we assume no change in prices or costs in future years. The investment will be made at the beginning of 2016, and all transactions thereafter occur on the last day of the year. Tenilite’s required rate of return is 14%.

There is no difference between the modernise and replace alternatives in terms of required working capital. Tenilite has a special waiver on income taxes until 2022.

Required 1 Sketch the cash inflows and outflows of the modernise and replace alternatives over the 2016–2022 period.