If retained, a machine would be depreciated £3,000 for each of the next five years, at which point it would be fully written-down and scrapped. The machine could be sold at any point in the next year for £18,000, the gain being subject to tax at 30 per cent, payable the following year. If it were sold, a new machine costing £90,000 would be bought. The new machine would receive 20 per cent writing-down allowances to be offset annually against profits. It is estimated that the new machine would save material costs of £30,000 per year compared to the current machine. Profits are subject to tax at 30 per cent, payable nine months after the end of the company’s financial period. The new machinery would have a five-year life, with a residual value of zero, and would be depreciated straight line over that period. Prepare a cash flow forecast for the replacement option, and indicate how the profits reported in the financial statements would be altered were the existing machine to be replaced.