Cando limited is considering investing K40 million in equipment which will generate a net cash flow of K16 Million per year four years. The company is able to depriciate the equipment at the rate of of 20% per year on a straight line for tax purposes. The market value of the equipment at the end of the four years is expected to be K15 million. The difference between the market value and the equipments tax value(cost less depreciation to date of sale) is termed as recoupment which in this case is subject to tax.

The corporation tax is 28%. the companys cost of capital is 14%.

Assume depreciation is allowable as deduction before computing tax and that the tax as an outflow from the cash at 28%

a)What is the projects net prsent value

b) What is the projects IRR

C) What is the projects payack

d) Is the project viable? justify your deision