A project will require an investment in a new asset of 10,000 dollars. It will be used on a project for four years after which it will be disposed of on the final day of year 4. Tax is payable at 30% on the same year and capital allowances are available at 25% reducing the balance. The net operating cash flows from the project are expected to be 4,000 dollars per annum. The companys cost of capital is 30%. Ignore inflation.

i. Calculate the written down allowance and hence the tax savings for each year if the proceeds on disposal of the asset are 2, 500 dollars.

ii. Identify the free cash flows for the project and calculate its net present value