You have been assigned to assess a proposal for mining and selling a small deposit of high-grade diamond. The project requires an investment of $8 million in mining machinery at time 0. The machinery falls into asset class 38, which has a CCA rate of 30%. At the end of 5 years, the machinery has no further value but the firm will keep it to continue to enjoy tax savings from undepreciated capital cost allowance. As the project gears up in the early years, working capital increases by$1.3 million, which is a one-time effect at time 9, but later at the end of the project's life, the investment in working capital will be recovered. The company expects to be able to sell 780,000 kilograms of diamond a year at a price of $30 a kilogram for the next 5 years. The expenses of mining and refining are 50% of the revenues. The tax rate is 40%. Assuming a 10% discount rate, calculate the project's NPV by using:

l.Top-Down Approach (you are required to compile a UCC schedule and an operating cash flow table for yours 0 through 5; an Excel template will be very helpful here; don't forget the tax savings from capital cost allowance that will be generated even after the project ends)

ll. Tax Shield Approach (use the tax-shield definition of operating cash flow and use Equation [10C.1] on p.392 to calculate the present value of depreciation tax savings.)