ERS is a medium size family controlled business with the family holding about 50.1% shareholding while the remainder is in the hands of outsiders. The oldest son in the family Ethan is both CEO and Chairman of the board. The company is considering a project that would involve investment of K11 million now and would yield gross taxable net cash flows of K3.625m per annum for each of the next five years. The project will raise ERS's debt capacity by K8 million for the duration of the project at an interest rate of 5%. The costs of raising this loan are estimated at K250,000 (gross). The company's existing ungeared cost of equity is 12% and corporation tax is 20% payable one year in arrears. ERS currently has a ratio of 1:2 for market value of debt to market value of equity. Required a) By calculating the APV, recommend whether ERS should accept this project with the proposed financing