Project 1 : Nthando General Dealers Project proposal for Nthando General Dealers, Management agreed to invest K 750,000, all in fixed capital specifically plant and machinery as it intends to produce Baby instant porridge in the long run away from its traditional business of producing Protective clothing and construction, this new project will depreciate its assets after five years anticipated useful life on a straight line basis at a rate of 20% and record operating income after taxes, respectively, of K100, 000 and K150, 000 each year for the next two years. Nthando anticipates inflation to be at 10% in year three affecting prices in that year and 15% in year four and five, it is strongly believed that prices for that period will severely be affected and cash flows will need to reflect inflation as such. The general manager was reminded that, it might take time to build a production plant for the new project, the vacant building currently being used for storage is the best alternative available. The building has a rental cost of K50, 000 per year and if production goes ahead they can use the building and rent a building for storage at a rental cost of K10000 per year. Due to Covid -19 cash flows have been affected, management decided that if production does not go ahead the storage building can be rented out at a cost of K40, 000 and still incur K10, 000 as storage cost rent. Overheads and other cost will be at K30, 000 p.a increasing in tandem with inflation costs. Other costs include variable costs of K50, 000 and fixed costs of K30, 000 rising with the cost of inflation indicate above. Working capital in the first year is anticipated to be pegged at K 50,000 increasing by 20% annually until forth year when working capital imprest is called back. The accountant reported that interest on the acquired loan is K20, 000 annually and he is of the opinion that it should be included in the project valuation. Nthando will sell the asset in the fifth year as scrap at a cost of K50, 000 .Profits are taxed at the rate of 30 % p.a. The company anticipates to earn a 15 % internal rate of return on the investment. Tasks Required: a. Calculate the Net present value of the project( Horizontal method) (15 marks) b. Calculate the IRR of the project and comment as to whether the project should be undertaken. ( 10 marks)