a. You are interested in investing in a project whose initial cash outlay is estimated as sh 150000. The project is expected to generate the following cash flows for its 4 year life.

Year	Year 1	Year 2	Year 3	Year 4
Cash flows	50000	60000	80000	10000

The cost of capital is 16%

Required

Calculate the net present values of the profit and make an investment decision on the project. (6 marks)

b. Valco Ltd purchased an asset three years ago at a ksh 400000. The asset was expected to last for 8 years with a zero salvage value. However, after critical analysis, the asset is expected to last for another 7 years and have a zero salvage value. The company uses a straight line method of depreciation.

Required

Determine the amount of depreciation to charged at the new economic life of the asset.

(6 marks)

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