Prospect Limited is considering investing in some new plant. The plant would cost £1,000,000 to implement. It would last five years and it would then be sold for £50,000. The relevant profit and loss accounts for each year during the life of the project are as follows:

Additional information:
1 All sales are made and all purchases are obtained on credit terms.
2 Outstanding trade debtors and trade creditors at the end of each year are expected to be as follows:

3 Expenses would all be paid in cash during each year in question.
4 Taxation would be paid on 1 January following each year end.
5 Half the plant would be paid for in cash on 1 April Year 0, and the remaining half (also in cash) on 1 January Year 1. The resale value of £50,000 will be received in cash on 31 March Year 6.

Required:
Calculate the annual net cash flow arising from the purchase of this newplant.

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Year to 31 March Sales Less: Cost of goods sold 2 2 £000 2 2 2 Opening stock Purchases 1 Less: Closing stock Gross profit Less: Expenses 1 Depreciation Net profit Taxation Retained profits Trade creditors Trade debtors £000 200 240 300 320 400 Year 0 250 270 330 150