● A project, requiring initial investment of `5,00,000 in creating a fixed facility, ensures net incremental inflow of `1,50,000 per annum before deduction of depreciation and tax.

The fixed facility is likely to have economic life of five years with scrap value of `1,00,000 at the end. Depreciation is allowed on straight-line basis and marginal tax rate is 40%.

You are required to estimate the highest opportunity cost that the project can bear.