INFORMATION Zvapano Ltd is considering buying a machinery for its manufacturing facility. The new machine will be purchased from Namibia for R385 000. The cost of shipping the machine to the premises is R38 000, and the cost of installation is R23 000. The new machine will require working capital to increase by R95 000. The machine has a useful life of 5 years and depreciation is calculated over 5 years using the straightline method. The tax rate applicable to the company is 28%. The earnings before interest, tax, depreciation, and amortisation expected to be generated by the new machine are as follows:

year Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA)

1 130 000

2 130 000

3 130 000

4 130 000

5 130 000

Five years after the purchase, the machine can be sold for R120 500 and that the removal and clean-up costs are R17 500. The net working capital will be recovered.

3.1 Initial investment (6 marks)

3.2 Operating cash flows over the five-year period (7 marks)

3.3 Terminal cash flow.