The correct answer is: Option IV; defer the interim dividend.

The taxation payment should not be deferred because the tax authority can charge interest and fine the company. Cancelling the dividend will not be favoured by the shareholders but would bring the overdraft down to within the limit in May and June. The capital expenditure should not be deferred because the machine will generate future positive cash flows. The company therefore may be in a position to pay an enhanced final dividend at the end of the year.

Note: the above solutions are for the short-term cash flow but the company should also consider long-term funding for the capital expenditure.