a) A firm is considering investing in a small factory for a period of 4 years. Given the following information calculate the NPV of the proposed investment. The factory will cost 20,000 and its salvage value is expected to be 5,000 in 4 years' time. The firm will depreciate the factory to a final value of zero over the 4 year period. Any difference between the salvage value and the book value of the equillment will be treated as a taxable gain. The revenue from the factory at the end of the first year will be 7,000 and the expenses will be 2,000, both will rise with inflation which is expected to be 2% per annum. The initial investment in working capital is 1,000 and this is expected to increase by 100 every year. The firm's corporate tax rate is 30%. Calculate the Investment Cashflows, Operating Cashflows and Working Capital Cashflows for this investment proposal. If the correct discount rate is 11%, calculate the NPV of this investment for the firm and comment on whether the firm should undertake this investment or not