2.3 Masuku Ltd is evaluating a 5-year project with an operating (before tax) profit of R100 000 in the first year. The annual profit is expected to increase by 8% per year over the life of the project. The initial cost of the investment is R900 000. From year 1 to year 5, depreciation of R200 000 will be considered. The companys WACC is 15% and a tax rate of 28% applies.

Required

2.3.1 Determine the operating cash flow for this Project. (5 Marks)

2.3.2 Determine the viability of the project using the NPV analysis. (5 marks)