QUESTION 2 (20 Marks) 2.1. REQUIRED: Calculate the initial investment of the replacement project from the information provided below. (8 marks) INFORMATION: ProcessBiz Ltd has to replace an old machine (this machine cannot be repaired since parts are not available) with a new improved machine that will cost R2 400 000 plus installation of R120 000. The current/old machine is valued at R24 000 in the accounting records and an offer of R36 000 was already received from a prospective buyer. An amount of R7 200 will have to be paid for removal of the current/old machine. The current/old machine required an increase in net working capital of R240 000 when it was introduced. The capital expenditure on the new machine will result in an increase of R360 000 to net working capital by R360 000. The company is paying tax at a rate of 30%. 3 / 6 + 138% je 2.2. REQUIRED: Use the information provided below to calculate operating cash flows for five years. (6 marks) INFORMATION: QualityCars Ltd has made the decision to invest in new equipment that will cost R10 000 000, which excludes R500 000 for installation. The equipment will be used to produce a new electric vehicle for the South African marker. The new equipment will be depreciated on a straight-line basis over a five-year period. 1 3 / 6 138% LED The expected incremental increases in net operating profit (or losses) after taxes over the five-year life of the investment is tabled below: Year R 1 (100 000) 2 (50 000) 3 700 000 4 500 000 5 400 000 ype here to search BE e 10/0 2.3. REQUIRED: Calculate the terminal cash flow based on the information provided below. (6 marks) INFORMATION: Vhembe Ltd expects to sell redundant equipment at the end of its useful life for R72 000. The equipment is expected to have no carrying value. The decommission costs are estimated to be R12 000. Net working capital worth R550 000 was invested at the beginning of the project. The company is subject to a tax rate of 30%