The premium juice bar store project was adopted. It is now more than three years since the day you joined the company as a graduate. You are now the Assistant Finance Manager of the companys chain of high-end juice businesses. Revenue growth has picked up considerably and you are tasked to review the potential upgrade of the juicing machine to accommodate the growth. The machine was purchased at the start of business on 1 January 2015 for $150,000, and generated sales of $100,000 that year. Sales growth has been 10% per year and is expected to persist. A new machine would cost $250,000, and would double the sales at the end of year 1 and the sales would then increase 10% in subsequent years. The old machine required a working capital of 15% of projected sales and the new one needs 20% of projected sales. Note that working capital investment is necessary to produce goods that will be sold, and thus the working capital amount must be invested before sales are made. The old machine was depreciated using the straight-line method over 5 years towards zero salvage value and was sold today, 31 December 2017, at its market value of $70,000. Assume that the old equipment has no economic or market value at the end of the project. The new machine will be depreciated using the same method over 5 years, and can be sold for $130,000 after 2 years. Assume an effective tax rate of 17%. The annual cash expenses are 75% and 55% of sales respectively for the older machine and the newly upgraded machine

(a) Calculate the cash flow from the sale of the old juicing machine on 31 December 2017. (6 marks)

(b) Calculate the net initial cash flow of the upgrade project on 31 December 2017. (6 marks)

(c) Calculate the annual cash flow of the upgrade project for 31 December 2018. (12 marks)

(d) For credit purposes, you want to estimate the portion of the potential liquidation value of the store. Calculate the terminal cash flow from the sale of the new machine on 31 December 2019.