XYZ Corporation is planning to invest in a new project with the following details:

• Initial Investment: USD 500,000
• Project Life: 9 years
• Salvage Value: USD 50,000
• Depreciation Method: Reducing balance
• Cost of Capital: 14%

Year-wise Cash Flows:

Year	Cash flow
1	80,000
2	85,000
3	90,000
4	95,000
5	100,000
6	105,000
7	110,000
8	115,000
9	120,000

a) What is the role of depreciation in investment appraisal?

b) Explain the reducing balance method of depreciation and its advantages.

c) Based on the provided data, calculate: i) Annual depreciation using the reducing balance method. ii) Payback period. iii) NPV. iv) IRR. v) Advise if XYZ Corporation should proceed with the investment.