Question: Gustava seeks to replace a coffee machine purchased two years ago for R76 000 with a new one. The existing coffee machine has a useful

Gustava seeks to replace a coffee machine purchased two years ago for R76 000 with a new one. The existing coffee machine has a useful life of four years and can be sold today for R55 000 with removal costs of R4 000. The machine was being depreciated over a four-year straight-line period. The cost price of the new coffee machine is R80 000 and will be depreciated over its five year useful life using a straight line method. It will have no residual value and will be worth R0 at the end of its five year useful life. The use of the new coffee machine is expected to increase current assets to R30 000 and current liabilities to R80 000. 40% tax bracket.

Calculate the terminal cash flow from the use of the new grinding machine. Show all calculations.

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