Required:

$($a$)$ Prepare a statement of the incremental cash flows arising from the purchase of the new equipment.

$($b$)$ Calculate the net present value of the proposed purchase of new equipment.

$($c$)$ State, with reasons, whether the business should purchase the new equipment.

$($d$)$ Explain why cash flow forecasts are used rather than profit forecasts to assess the viability of proposed capital expenditure projects.