TULUI (LJMIRJ) QUESTION TWO Cando Limited is considering investing K40 million in equipment which will generate a net cash flow of K16 million per year for four years. The company is able to depreciate the equipment at a rate of 20% per year on a straight-line for tax purposes. The market value of the equipment a the end of the four years is expected to be K15 million. The difference between the market value and the equipment's tax value (cost less depreciation to date of sale) is termed a recoupment which in this case is subject to tax. The corporation tax is 28%. The company's cost of capital is 14%. (Hint: assume depreciation is allowable as deduction before computing tax and that the tax as an outflow from the cash flows at 28%) (a) What is the project's net present value? (b) What is the project's RR? (c) What is the project's payback (d) Is the project viable? Justify your decision. (8 marks) (7 marks) (5 marks) (5 marks) Total (25 marks)