INFORMATION Canon Limited wants to replace equipment that has reached the end of its useful life with new equipment that will cost R600 000. Additional installation costs of R80 000 will have to be incurred on this new equipment.

The old equipment has a NIL book value but can be sold for R50 000. Clean-up and removal costs of R6 000 will have to be paid for the old equipment.

Working capital for the old equipment amounted to R70 000. The new equipment will result in an increase in working capital of R110 000.

The company is subject to a tax rate of 28%.

Calculate the initial investment of the replacement project for Canon Ltd.

INFORMATION

Premier Industries is to invest R400 000 in new equipment, excluding installation costs of R50 000. The equipment will be depreciated on a straight line basis over its five-year useful life. The following are the expected incremental increases in net operating profit (loss) after taxes (NOPAT) over the five-year life of the equipment:

Year 1 = 110 000 Year 2 = 112 000 Year 3 = 120 000 Year 4 = 124 000 Year 5 = 130 000

Calculate the operating cash flows over the five years for Premier Industries.

INFORMATION

Delta Limited expects to sell a delivery vehicle for R80 000 as it has reached the end of its useful life. This delivery vehicle has a book value of R10 000. Net working capital of R10 000 will be recovered on this delivery vehicle. The company is subject to tax at 28%.

Calculate the terminal cash flow for the delivery vehicle for Delta Limited.