QUESTION 1 CAPITAL BUDGETING AND CASH FLOW (20 MARKS) PRINCIPLES REQUIRED 1.1 Calculate the initial investment of the replacement project from the information provided below. (8) INFORMATION Gooners Ltd wants to replace an old machine with a new one that will cost R750 000 plus staff training costs of R50 000 for the machine operators. The old machine has a book value of RO and can be sold for R15 000. R3 000 will be paid to remove the old machine. The old machine required an increase in net working capital of R180 000. The new capital an increase in the net working capital by R270 000. The firm is expenditure will result in subjected to a tax rate of 30%. 681