QUESTION 4 Your firm is considering investing in a project, the details of which are given below: A new machine costing K10,000 is required. The project also requires an initial net working capital of K1,000, which will be recovered at the end of the project life (year 3) The new machine is being depreciated using the straight-line method to a zero salvage value. The new machine can be sold at the end of the project (end of year 3) for K5,000. The project will generate earnings before depreciation, interest, and taxes (EBDIT) of K4,000 in year 1, K5,000 in year 2 and K6,000 in year 3. The firm's tax rate is 40%. (a) What will be the initial investment in year 0? (3 marks) (b) What are the post-tax operating cash flows in years 1 to 3? (9 marks) (c) What is the non-operating cash flow in year 3? (3 marks) (d) Use the AAR, NPV and Pl methods to decide if the project should be undertaken or not. Use 10% as the discount rate where needed. (12 marks) (Total: 25 marks)