VWX Industries is evaluating a new project. The following details are provided:

• Initial Investment: EUR 350,000
• Life of the Project: 8 years
• Residual Value: EUR 30,000
• Depreciation: Units of production
• Cost of Capital: 12%

Projected Cash Flows:

Year	Cash flow
1	60,000
2	65,000
3	70,000
4	75,000
5	80,000
6	85,000
7	90,000
8	95,000

a) Define the units of production method of depreciation and its application.

b) Discuss the importance of considering residual value in depreciation calculations.

c) From the given data, calculate: i) Depreciation expense for each year using units of production method. ii) Payback period. iii) NPV. iv) ARR. v) IRR.